CHAPTER 4.1. FUND TRANSFERS
IC 26-1-4.1
Chapter 4.1. Fund Transfers
IC 26-1-4.1-101
Short title
Sec. 101. IC 26-1-4.1 may be cited as the Uniform CommercialCode-Funds Transfers.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-102
Subject matter
Sec. 102. Except as otherwise provided in IC 26-1-4.1-108, thischapter applies to funds transfers defined in IC 26-1-4.1-104.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-103
Payment order_definitions
Sec. 103. (a) In IC 26-1-4.1:
(1) "Payment order" means an instruction of a sender to areceiving bank, transmitted orally, electronically, or in writing,to pay, or to cause another bank to pay, a fixed or determinableamount of money to a beneficiary if:
(i) the instruction does not state a condition to payment tothe beneficiary other than time of payment;
(ii) the receiving bank is to be reimbursed by debiting anaccount of, or otherwise receiving payment from, the sender;and
(iii) the instruction is transmitted by the sender directly tothe receiving bank or to an agent, funds-transfer system, orcommunication system for transmittal to the receiving bank.
(2) "Beneficiary" means the person to be paid by thebeneficiary's bank.
(3) "Beneficiary's bank" means the bank identified in a paymentorder in which an account of the beneficiary is to be creditedpursuant to the order or which otherwise is to make payment tothe beneficiary if the order does not provide for payment to anaccount.
(4) "Receiving bank" means the bank to which the sender'sinstruction is addressed.
(5) "Sender" means the person giving the instruction to thereceiving bank.
(b) If an instruction complying with subsection (a)(1) is to makemore than one (1) payment to a beneficiary, the instruction is aseparate payment order with respect to each payment.
(c) A payment order is issued when it is sent to the receiving
bank.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-104
Funds transfer_definitions
Sec. 104. In IC 26-1-4.1:
(a) "Funds transfer" means the series of transactions, beginningwith the originator's payment order, made for the purpose of makingpayment to the beneficiary of the order. The term includes anypayment order issued by the originator's bank or an intermediarybank intended to carry out the originator's payment order. A fundstransfer is completed by acceptance by the beneficiary's bank of apayment order for the benefit of the beneficiary of the originator'spayment order.
(b) "Intermediary bank" means a receiving bank other than theoriginator's bank or the beneficiary's bank.
(c) "Originator" means the sender of the first payment order in afunds transfer.
(d) "Originator's bank" means (i) the receiving bank to which thepayment order of the originator is issued if the originator is not abank, or (ii) the originator if the originator is a bank.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-105
Other definitions
Sec. 105. (a) In IC 26-1-4.1:
(1) "Authorized account" means a deposit account of acustomer in a bank designated by the customer as a source ofpayment of payment orders issued by the customer to the bank.If a customer does not so designate an account, any account ofthe customer is an authorized account if payment of a paymentorder from that account is not inconsistent with a restriction onthe use of that account.
(2) "Bank" means a person engaged in the business of bankingand includes a savings bank, savings association, credit union,and trust company. A branch or separate office of a bank is aseparate bank for purposes of IC 26-1-4.1.
(3) "Customer" means a person, including a bank, having anaccount with a bank or from whom a bank has agreed to receivepayment orders.
(4) "Funds-transfer business day" of a receiving bank means thepart of a day during which the receiving bank is open for thereceipt, processing, and transmittal of payment orders andcancellations and amendments of payment orders.
(5) "Funds-transfer system" means a wire transfer network,
automated clearing house, or other communication system of aclearing house or other association of banks through which apayment order by a bank may be transmitted to the bank towhich the order is addressed.
(6) "Good faith" means honesty in fact and the observance ofreasonable commercial standards of fair dealing.
(7) "Prove" with respect to a fact means to meet the burden ofestablishing the fact (IC 26-1-1-201(8)).
(b) Other definitions applying to IC 26-1-4.1 and the sections inwhich they appear are:
"Acceptance". IC 26-1-4.1-209.
"Beneficiary". IC 26-1-4.1-103.
"Beneficiary's bank". IC 26-1-4.1-103.
"Executed". IC 26-1-4.1-301.
"Execution date". IC 26-1-4.1-301.
"Funds transfer". IC 26-1-4.1-104.
"Funds-transfer system rule". IC 26-1-4.1-501.
"Intermediary bank". IC 26-1-4.1-104.
"Originator". IC 26-1-4.1-104.
"Originator's bank". IC 26-1-4.1-104.
"Payment by beneficiary's bank to beneficiary". IC 26-1-4.1-405.
"Payment by originator to beneficiary". IC 26-1-4.1-406.
"Payment by sender to receiving bank". IC 26-1-4.1-403.
"Payment date". IC 26-1-4.1-401.
"Payment order". IC 26-1-4.1-103.
"Receiving bank". IC 26-1-4.1-103.
"Security procedure". IC 26-1-4.1-201.
"Sender". IC 26-1-4.1-103.
(c) The following definitions in IC 26-1-4 apply to thisIC 26-1-4.1:
"Clearing house". IC 26-1-4-104.
"Item". IC 26-1-4-104.
"Suspends payments". IC 26-1-4-104.
(d) In addition IC 26-1-1 contains general definitions andprinciples of construction and interpretation applicable throughoutIC 26-1-4.1.
As added by P.L.189-1991, SEC.4. Amended by P.L.79-1998,SEC.29.
IC 26-1-4.1-106
Time payment order is received
Sec. 106. (a) The time of receipt of a payment order orcommunication canceling or amending a payment order isdetermined by the rules applicable to receipt of a notice stated inIC 26-1-1-201(27). A receiving bank may fix a cut-off time or times
on a funds-transfer business day for the receipt and processing ofpayment orders and communications canceling or amending paymentorders. Different cut-off times may apply to payment orders,cancellations, or amendments, or to different categories of paymentorders, cancellations, or amendments. A cut-off time may apply tosenders generally or different cut-off times may apply to differentsenders or categories of payment orders. If a payment order orcommunication canceling or amending a payment order is receivedafter the close of a funds-transfer business day or after theappropriate cut-off time on a funds-transfer business day, thereceiving bank may treat the payment order or communication asreceived at the opening of the next funds-transfer business day.
(b) If IC 26-1-4.1 refers to an execution date or payment date orstates a day on which a receiving bank is required to take action, andthe date or day does not fall on a funds-transfer business day, thenext day that is a funds-transfer business day is treated as the date orday stated, unless the contrary is stated in IC 26-1-4.1.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-107
Federal reserve regulations and operating circulars
Sec. 107. Regulations of the Board of Governors of the FederalReserve System and operating circulars of the Federal Reserve Bankssupersede any inconsistent provision of IC 26-1-4.1 to the extent ofthe inconsistency.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-108
Exclusion of consumer transactions governed by federal law
Sec. 108. IC 26-1-4.1 does not apply to a funds transfer any partof which is governed by the Electronic Fund Transfer Act of 1978(Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. 1693 et seq.)as amended from time to time.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-201
"Security procedure"
Sec. 201. "Security procedure" means a procedure established byagreement of a customer and a receiving bank for the purpose of (i)verifying that a payment order or communication amending orcanceling a payment order is that of the customer, or (ii) detectingerror in the transmission or the content of the payment order orcommunication. A security procedure may require the use ofalgorithms 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 authorizedspecimen signature of the customer is not by itself a securityprocedure.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-202
Authorized and verified payment orders
Sec. 202. (a) A payment order received by the receiving bank isthe authorized order of the person identified as sender if that personauthorized the order or is otherwise bound by it under the law ofagency.
(b) If a bank and its customer have agreed that the authenticity ofpayment orders issued to the bank in the name of the customer assender will be verified pursuant to a security procedure, a paymentorder received by the receiving bank is effective as the order of thecustomer, whether or not authorized, if (i) the security procedure isa commercially reasonable method of providing security againstunauthorized payment orders, and (ii) the bank proves that itaccepted the payment order in good faith and in compliance with thesecurity procedure and any written agreement or instruction of thecustomer restricting acceptance of payment orders issued in the nameof the customer. The bank is not required to follow an instructionthat violates a written agreement with the customer or notice ofwhich is not received at a time and in a manner affording the bank areasonable opportunity to act on it before the payment order isaccepted.
(c) Commercial reasonableness of a security procedure is aquestion of law to be determined by considering the wishes of thecustomer expressed to the bank, the circumstances of the customerknown to the bank, including the size, type, and frequency ofpayment orders normally issued by the customer to the bank,alternative security procedures offered to the customer, and securityprocedures in general use by customers and receiving banks similarlysituated. A security procedure is deemed to be commerciallyreasonable if (i) the security procedure was chosen by the customerafter the bank offered, and the customer refused, a security procedurethat was commercially reasonable for that customer, and (ii) thecustomer expressly agreed in writing to be bound by any paymentorder, whether or not authorized, issued in its name and accepted bythe bank in compliance with the security procedure chosen by thecustomer.
(d) The term "sender" in IC 26-1-4.1 includes the customer inwhose name a payment order is issued if the order is the authorizedorder of the customer under subsection (a), or it is effective as theorder of the customer under subsection (b). (e) This section applies to amendments and cancellations ofpayment orders to the same extent it applies to payment orders.
(f) Except as provided in this section and inIC 26-1-4.1-203(a)(1), rights and obligations arising under thissection or IC 26-1-4.1-203 may not be varied by agreement.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-203
Unenforceability of certain verified payment orders
Sec. 203. (a) If an accepted payment order is not, underIC 26-1-4.1-202(a), an authorized order of a customer identified assender, but is effective as an order of the customer pursuant toIC 26-1-4.1-202(b), the following rules apply:
(1) By express written agreement, the receiving bank may limitthe extent to which it is entitled to enforce or retain payment ofthe payment order.
(2) The receiving bank is not entitled to enforce or retainpayment of the payment order if the customer proves that theorder was not caused, directly or indirectly, by a person:
(i) entrusted at any time with duties to act for the customerwith respect to payment orders or the security procedure; or
(ii) who obtained access to transmitting facilities of thecustomer or who obtained, from a source controlled by thecustomer and without authority of the receiving bank,information facilitating breach of the security procedure,regardless of how the information was obtained or whetherthe customer was at fault. Information includes any accessdevice, computer software, or the like.
(b) This section applies to amendments of payment orders to thesame extent it applies to payment orders.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-204
Refund of payment and duty of customer to report with respect tounauthorized payment order
Sec. 204. (a) If a receiving bank accepts a payment order issuedin the name of its customer as sender which is (i) not authorized andnot effective as the order of the customer under IC 26-1-2.1-202, or(ii) not enforceable, in whole or in part, against the customer underIC 26-1-4.1-203, the bank shall refund any payment of the paymentorder received from the customer to the extent the bank is notentitled to enforce payment and shall pay interest on the refundableamount calculated from the date the bank received payment to thedate of the refund. However, the customer is not entitled to interestfrom the bank on the amount to be refunded if the customer fails to
exercise ordinary care to determine that the order was not authorizedby the customer and to notify the bank of the relevant facts within areasonable time not exceeding ninety (90) days after the date thecustomer received notification from the bank that the order wasaccepted or that the customer's account was debited with respect tothe order. The bank is not entitled to any recovery from the customeron account of a failure by the customer to give notification as statedin this section.
(b) Reasonable time under subsection (a) may be fixed byagreement as stated in IC 26-1-1-204(1), but the obligation of areceiving bank to refund payment as stated in subsection (a) may nototherwise be varied by agreement.
As added by P.L.189-1991, SEC.4. Amended by P.L.1-1992,SEC.138.
IC 26-1-4.1-205
Erroneous payment orders
Sec. 205. (a) If an accepted payment order was transmittedpursuant to a security procedure for the detection of error and thepayment order (i) erroneously instructed payment to a beneficiary notintended by the sender, (ii) erroneously instructed payment in anamount greater than the amount intended by the sender, or (iii) wasan erroneously transmitted duplicate of a payment order previouslysent by the sender, the following rules apply:
(1) If the sender proves that the sender or a person acting onbehalf of the sender pursuant to IC 26-1-4.1-206 complied withthe security procedure and that the error would have beendetected if the receiving bank had also complied, the sender isnot obligated to pay the order to the extent stated insubdivisions (2) and (3).
(2) If the funds transfer is completed on the basis of anerroneous payment order described in clause (i) or (iii) ofsubsection (a), the sender is not obliged to pay the order and thereceiving bank is entitled to recover from the beneficiary anyamount paid to the beneficiary to the extent allowed by the lawgoverning mistake and restitution.
(3) If the funds transfer is completed on the basis of a paymentorder described in clause (ii) of subsection (a), the sender is notobligated to pay the order to the extent the amount received bythe beneficiary is greater than the amount intended by thesender. In that case, the receiving bank is entitled to recoverfrom the beneficiary the excess amount received to the extentallowed by the law governing mistake and restitution.
(b) If (i) the sender of an erroneous payment order described insubsection (a) is not obligated to pay all or part of the order, and (ii)
the sender receives notification from the receiving bank that theorder was accepted by the bank or that the sender's account wasdebited with respect to the order, the sender has a duty to exerciseordinary care, on the basis of information available to the sender, todiscover the error with respect to the order and to advise the bank ofthe relevant facts within a reasonable time, not exceeding ninety (90)days, after the bank's notification was received by the sender. If thebank proves that the sender failed to perform that duty, the sender isliable to the bank for the loss the bank proves it incurred as a resultof the failure, but the liability of the sender may not exceed theamount of the sender's order.
(c) This section applies to amendments to payment orders to thesame extent it applies to payment orders.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-206
Transmission of payment order through funds-transfer or othercommunication system
Sec. 206. (a) If a payment order addressed to a receiving bank istransmitted to a funds-transfer system or other third-partycommunication system for transmittal to the bank, the system isdeemed to be an agent of the sender for the purpose of transmittingthe payment order to the bank. If there is a discrepancy between theterms of the payment order transmitted to the system and the termsof the payment order transmitted by the system to the bank, the termsof the payment order of the sender are those transmitted by thesystem. This section does not apply to a funds-transfer system of theFederal Reserve Banks.
(b) This section applies to cancellations and amendments ofpayment orders to the same extent it applies to payment orders.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-207
Misdescription of beneficiary
Sec. 207. (a) Subject to subsection (b), if, in a payment orderreceived by the beneficiary's bank, the name, bank account number,or other identification of the beneficiary refers to a nonexistent orunidentifiable person or account, no person has rights as abeneficiary of the order and acceptance of the order cannot occur.
(b) If a payment order received by the beneficiary's bank identifiesthe beneficiary both by name and by an identifying or bank accountnumber and the name and number identify different persons, thefollowing rules apply:
(1) Except as otherwise provided in subsection (c), if thebeneficiary's bank does not know that the name and number
refer to different persons, it may rely on the number as theproper identification of the beneficiary of the order. Thebeneficiary's bank need not determine whether the name andnumber refer to the same person.
(2) If the beneficiary's bank pays the person identified by nameor knows that the name and number identify different persons,no person has rights as beneficiary except the person paid bythe beneficiary's bank if that person was entitled to receivepayment from the originator of the funds transfer. If no personhas 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 beneficiaryinconsistently by name and number, and (iii) the beneficiary's bankpays 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 itsorder.
(2) If the originator is not a bank and proves that the personidentified by number was not entitled to receive payment fromthe originator, the originator is not obliged to pay its orderunless the originator's bank proves that the originator, beforeacceptance of the originator's order, had notice that payment ofa payment order issued by the originator might be made by thebeneficiary's bank on the basis of an identifying or bank accountnumber even if it identifies a person different from the namedbeneficiary. Proof of notice may be made by any admissibleevidence. The originator's bank satisfies the burden of proof ifit proves that the originator, before the payment order wasaccepted, signed a writing stating the information to which thenotice relates.
(d) In a case governed by subsection (b)(1), if the beneficiary'sbank rightfully pays the person identified by number and that personwas not entitled to receive payment from the originator, the amountpaid may be recovered from that person to the extent allowed by thelaw governing mistake and restitution as follows:
(1) If the originator is obliged to pay its payment order as statedin subsection (c), the originator has the right to recover.
(2) If the originator is not a bank and is not obliged to pay itspayment order, the originator's bank has the right to recover.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-208
Misdescription of intermediary bank or beneficiary's bank
Sec. 208. (a) This subsection applies to a payment orderidentifying an intermediary bank or the beneficiary's bank only by an
identifying number.
(1) The receiving bank may rely on the number as the properidentification of the intermediary or beneficiary's bank and neednot determine whether the number identifies a bank.
(2) The sender is obliged to compensate the receiving bank forany loss and expenses incurred by the receiving bank as a resultof its reliance on the number in executing or attempting toexecute the order.
(b) This subsection applies to a payment order identifying anintermediary bank or the beneficiary's bank both by name and anidentifying number if the name and number identify differentpersons.
(1) If the sender is a bank, the receiving bank may rely on thenumber as the proper identification of the intermediary orbeneficiary's bank if the receiving bank, when it executes thesender's order, does not know that the name and numberidentify different persons. The receiving bank need notdetermine whether the name and number refer to the sameperson or whether the number refers to a bank. The sender isobliged to compensate the receiving bank for any loss andexpenses incurred by the receiving bank as a result of itsreliance on the number in executing or attempting to execute theorder.
(2) If the sender is not a bank and the receiving bank proves thatthe sender, before the payment order was accepted, had noticethat the receiving bank might rely on the number as the properidentification of the intermediary or beneficiary's bank even ifit identifies a person different from the bank identified by name,the rights and obligations of the sender and the receiving bankare governed by subdivision (1), as though the sender were abank. Proof of notice may be made by any admissible evidence.The receiving bank satisfies the burden of proof if it proves thatthe sender, before the payment order was accepted, signed awriting stating the information to which the notice relates.
(3) Regardless of whether the sender is a bank, the receivingbank may rely on the name as the proper identification of theintermediary or beneficiary's bank if the receiving bank, at thetime it executes the sender's order, does not know that the nameand number identify different persons. The receiving bank neednot determine whether the name and number refer to the sameperson.
(4) If the receiving bank knows that the name and numberidentify different persons, reliance on either the name or thenumber in executing the sender's payment order is a breach ofthe obligation stated in IC 26-1-4.1-302(a)(1).As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-209
Acceptance of payment order
Sec. 209. (a) Subject to subsection (d), a receiving bank other thanthe beneficiary's bank accepts a payment order when it executes theorder.
(b) Subject to subsections (c) and (d), a beneficiary's bank acceptsa payment order at the earliest of the following times:
(1) when the bank:
(i) pays the beneficiary as stated in IC 26-1-4.1-405(a) orIC 26-1-4.1-405(b); or
(ii) notifies the beneficiary of receipt of the order or that theaccount of the beneficiary has been credited with respect tothe order unless the notice indicates that the bank is rejectingthe order or that funds with respect to the order may not bewithdrawn or used until receipt of payment from the senderof the order;
(2) when the bank receives payment of the entire amount of thesender's order pursuant to IC 26-1-4.1-403(a)(1) orIC 26-1-4.1-403(a)(2); or
(3) the opening of the next funds-transfer business day of thebank following the payment date of the order if, at that time, theamount of the sender's order is fully covered by a withdrawablecredit balance in an authorized account of the sender or thebank has otherwise received full payment from the sender,unless the order was rejected before that time or is rejectedwithin:
(i) one (1) hour after that time; or
(ii) one (1) hour after the opening of the next business day ofthe sender following the payment date if that time is later.
If notice of rejection is received by the sender after the paymentdate and the authorized account of the sender does not bearinterest, the bank is obliged to pay interest to the sender on theamount of the order for the number of days elapsing after thepayment date to the day the sender receives notice or learns thatthe order was not accepted, counting that day as an elapsed day.If the withdrawable credit balance during that period falls belowthe amount of the order, the amount of interest payable isreduced accordingly.
(c) Acceptance of a payment order cannot occur before the orderis received by the receiving bank. Acceptance does not occur undersubsection (b)(2) or (b)(3) if the beneficiary of the payment orderdoes not have an account with the receiving bank, the account hasbeen 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 beaccepted 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 theoriginator's bank executes the originator's payment order before theexecution date or pays the beneficiary of the originator's paymentorder before the payment date and the payment order is subsequentlycanceled pursuant to IC 26-1-4.1-211(b), the bank may recover fromthe beneficiary any payment received to the extent allowed by thelaw governing mistake and restitution.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-210
Rejection of payment order
Sec. 210. (a) A payment order is rejected by the receiving bank bya notice of rejection transmitted to the sender orally, electronically,or in writing. A notice of rejection need not use any particular wordsand is sufficient if it indicates that the receiving bank is rejecting theorder or will not execute or pay the order. Rejection is effectivewhen the notice is given if transmission is by a means that isreasonable in the circumstances. If notice of rejection is given by ameans that is not reasonable, rejection is effective when the notice isreceived. If an agreement of the sender and receiving bankestablishes the means to be used to reject a payment order, (i) anymeans complying with the agreement is reasonable and (ii) anymeans not complying is not reasonable unless no significant delay inreceipt of the notice resulted from the use of the noncomplyingmeans.
(b) This subsection applies if a receiving bank other than thebeneficiary's bank fails to execute a payment order despite theexistence on the execution date of a withdrawable credit balance inan authorized account of the sender sufficient to cover the order. Ifthe sender does not receive notice of rejection of the order on theexecution date and the authorized account of the sender does not bearinterest, the bank is obliged to pay interest to the sender on theamount of the order for the number of days elapsing after theexecution date to the earlier of the day the order is canceled pursuantto IC 26-1-4.1-211(d) or the day the sender receives notice or learnsthat the order was not executed, counting the final day of the periodas an elapsed day. If the withdrawable credit balance during thatperiod falls below the amount of the order, the amount of interest isreduced accordingly.
(c) If a receiving bank suspends payments, all unacceptedpayment orders issued to it are deemed rejected at the time the banksuspends payments. (d) Acceptance of a payment order precludes a later rejection ofthe order. Rejection of a payment order precludes a later acceptanceof the order.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-211
Cancellation and amendment of payment order
Sec. 211. (a) A communication of the sender of a payment ordercanceling or amending the order may be transmitted to the receivingbank orally, electronically, or in writing. If a security procedure is ineffect between the sender and the receiving bank, the communicationis not effective to cancel or amend the order unless thecommunication is verified pursuant to the security procedure or thebank agrees to the cancellation or amendment.
(b) Subject to subsection (a), a communication by the sendercanceling or amending a payment order is effective to cancel oramend the order if notice of the communication is received at a timeand in a manner affording the receiving bank a reasonableopportunity to act on the communication before the bank accepts thepayment order.
(c) After a payment order has been accepted, cancellation oramendment of the order is not effective unless the receiving bankagrees or a funds-transfer system rule allows cancellation oramendment without agreement of the bank.
(1) With respect to a payment order accepted by a receivingbank other than the beneficiary's bank, cancellation oramendment is not effective unless a conforming cancellation oramendment of the payment order issued by the receiving bankis also made.
(2) With respect to a payment order accepted by thebeneficiary's bank, cancellation or amendment is not effectiveunless the order was issued in execution of an unauthorizedpayment order, or because of a mistake by a sender in the fundstransfer which resulted in the issuance of a payment order:
(i) that is a duplicate of a payment order previously issuedby the sender;
(ii) that orders payment to a beneficiary not entitled toreceive payment from the originator; or
(iii) that orders payment in an amount greater than theamount the beneficiary was entitled to receive from theoriginator. If the payment order is canceled or amended, thebeneficiary's bank is entitled to recover from the beneficiaryany amount paid to the beneficiary to the extent allowed bythe 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 receivingbank after the execution date or payment date of the order.
(e) A canceled payment order cannot be accepted. If an acceptedpayment order is canceled, the acceptance is nullified and no personhas any right or obligation based on the acceptance. Amendment ofa payment order is deemed to be cancellation of the original order atthe time of amendment and issue of a new payment order in theamended form at the same time.
(f) Unless otherwise provided in an agreement of the parties or ina funds-transfer system rule, if the receiving bank, after accepting apayment order, agrees to cancellation or amendment of the order bythe sender or is bound by a funds-transfer system rule allowingcancellation or amendment without the bank's agreement, the sender,whether or not cancellation or amendment is effective, is liable to thebank for any loss and expenses, including reasonable attorney's fees,incurred by the bank as a result of the cancellation or amendment orattempted cancellation or amendment.
(g) A payment order is not revoked by the death or legalincapacity of the sender unless the receiving bank knows of the deathor of an adjudication of incapacity by a court of competentjurisdiction and has reasonable opportunity to act before acceptanceof the order.
(h) A funds-transfer system rule is not effective to the extent itconflicts with subsection (c)(2).
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-212
Liability and duty of receiving bank regarding unacceptedpayment order
Sec. 212. If a receiving bank fails to accept a payment order thatit is obliged by express agreement to accept, the bank is liable forbreach of the agreement to the extent provided in the agreement orin IC 26-1-4.1, but does not otherwise have any duty to accept apayment order or, before acceptance, to take any action, or refrainfrom taking action, with respect to the order except as provided inIC 26-1-4.1 or by express agreement. Liability based on acceptancearises only when acceptance occurs as stated in IC 26-1-4.1-209, andliability is limited to that provided in IC 26-1-4.1. A receiving bankis not the agent of the sender or beneficiary of the payment order itaccepts, or of any other party to the funds transfer, and the bank owesno duty to any party to the funds transfer except as provided inIC 26-1-4.1 or by express agreement.
As added by P.L.189-1991, SEC.4. Amended by P.L.1-1992,SEC.139.
IC 26-1-4.1-301
Execution and execution date
Sec. 301. (a) A payment order is "executed" by the receiving bankwhen it issues a payment order intended to carry out the paymentorder received by the bank. A payment order received by thebeneficiary's bank can be accepted but cannot be executed.
(b) "Execution date" of a payment order means the day on whichthe receiving bank may properly issue a payment order in executionof the sender's order. The execution date may be determined byinstruction of the sender but cannot be earlier than the day the orderis received and, unless otherwise determined, is the day the order isreceived. If the sender's instruction states a payment date, theexecution date is the payment date or an earlier date on whichexecution is reasonably necessary to allow payment to thebeneficiary on the payment date.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-302
Obligations of receiving bank in execution of payment order
Sec. 302. (a) Except as provided in subsections (b) through (d), ifthe receiving bank accepts a payment order pursuant toIC 26-1-4.1-209(a), the bank has the following obligations inexecuting the order:
(1) The receiving bank is obliged to issue, on the executiondate, a payment order complying with the sender's order and tofollow the sender's instructions concerning:
(i) any intermediary bank or funds-transfer system to be usedin carrying out the funds transfer; or
(ii) the means by which payment orders are to be transmittedin the funds transfer.
If the originator's bank issues a payment order to anintermediary bank, the originator's bank is obliged to instructthe intermediary bank according to the instruction of theoriginator. An intermediary bank in the funds transfer issimilarly bound by an instruction given to it by the sender of thepayment order it accepts.
(2) If the sender's instruction states that the funds transfer is tobe carried out telephonically or by wire transfer or otherwiseindicates that the funds transfer is to be carried out by the mostexpeditious means, the receiving bank is obliged to transmit itspayment order by the most expeditious available means, and toinstruct any intermediary bank accordingly. If a sender'sinstruction states a payment date, the receiving bank is obligedto transmit its payment order at a time and by means reasonablynecessary 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 apayment order may (i) use any funds-transfer system if use of thatsystem is reasonable in the circumstances, and (ii) issue a paymentorder to the beneficiary's bank or to an intermediary bank throughwhich a payment order conforming to the sender's order canexpeditiously be issued to the beneficiary's bank if the receiving bankexercises ordinary care in the selection of the intermediary bank. Areceiving bank is not required to follow an instruction of the senderdesignating a funds-transfer system to be used in carrying out thefunds transfer if the receiving bank, in good faith, determines that itis not feasible to follow the instruction or that following theinstruction would unduly delay completion of the funds transfer.
(c) Unless subsection (a)(2) applies or the receiving bank isotherwise instructed, the bank may execute a payment order bytransmitting its payment order by first class mail or by any meansreasonable in the circumstances. If the receiving bank is instructedto execute the sender's order by transmitting its payment order by aparticular means, the receiving bank may issue its payment order bythe means stated or by any means as expeditious as the means stated.
(d) Unless instructed by the sender, (i) the receiving bank may notobtain payment of its charges for services and expenses inconnection with the execution of the sender's order by issuing apayment order in an amount equal to the amount of the sender's orderless the amount of the charges, and (ii) may not instruct a subsequentreceiving bank to obtain payment of its charges in the same manner.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-303
Erroneous execution of payment order
Sec. 303. (a) A receiving bank that (i) executes the payment orderof the sender by issuing a payment order in an amount greater thanthe amount of the sender's order, or (ii) issues a payment order inexecution of the sender's order and then issues a duplicate order, isentitled to payment of the amount of the sender's order underIC 26-1-4.1-402(c) if that subsection is otherwise satisfied. The bankis entitled to recover from the beneficiary of the erroneous order theexcess payment received to the extent allowed by the law governingmistake and restitution.
(b) A receiving bank that executes the payment order of thesender by issuing a payment order in an amount less than the amountof the sender's order is entitled to payment of the amount of thesender's order under IC 26-1-4.1-402(c) if (i) that subsection isotherwise satisfied and (ii) the bank corrects its mistake by issuingan additional payment order for the benefit of the beneficiary of the
sender's order. If the error is not corrected, the issuer of theerroneous order is entitled to receive or retain payment from thesender of the order it accepted only to the extent of the amount of theerroneous order. This subsection does not apply if the receiving bankexecutes the sender's payment order by issuing a payment order in anamount less than the amount of the sender's order for the purpose ofobtaining payment of its charges for services and expenses pursuantto instruction of the sender.
(c) If a receiving bank executes the payment order of the senderby issuing a payment order to a beneficiary different from thebeneficiary of the sender's order and the funds transfer is completedon the basis of that error, the sender of the payment order that waserroneously executed and all previous senders in the funds transferare not obliged to pay the payment orders they issued. The issuer ofthe erroneous order is entitled to recover from the beneficiary of theorder the payment received to the extent allowed by the lawgoverning mistake and restitution.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-304
Duty of sender to report erroneously executed payment order
Sec. 304. If the sender of a payment order that is erroneouslyexecuted as stated in IC 26-1-4.1-303 receives notification from thereceiving bank that the order was executed or that the sender'saccount was debited with respect to the order, the sender has a dutyto exercise ordinary care to determine, on the basis of informationavailable to the sender, that the order was erroneously executed andto notify the bank of the relevant facts within a reasonable time notexceeding ninety (90) days after the notification from the bank wasreceived by the sender. If the sender fails to perform that duty, thebank is not obliged to pay interest on any amount refundable to thesender under IC 26-1-4.1-402(d) for the period before the bank learnsof the execution error. The bank is not entitled to any recovery fromthe sender on account of a failure by the sender to perform the dutystated in this section.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-305
Liability for late or improper execution or failure to executepayment order
Sec. 305. (a) If a funds transfer is completed but execution of apayment order by the receiving bank in breach of IC 26-1-4.1-302results in delay in payment to the beneficiary, the bank is obliged topay 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 notrecoverable.
(b) If execution of a payment order by a receiving bank in breachof IC 26-1-4.1-302 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 theterms of the payment order of the originator, the bank is liable to theoriginator for its expenses in the funds transfer and for incidentalexpenses and interest losses, to the extent not covered by subsection(a), resulting from the improper execution. Except as provided insubsection (c), additional damages are not recoverable.
(c) In addition to the amounts payable under subsections (a) and(b), damages, including consequential damages, are recoverable tothe extent provided in an express written agreement of the receivingbank.
(d) If a receiving bank fails to execute a payment order it wasobliged by express agreement to execute, the receiving bank is liableto the sender for its expenses in the transaction and for incidentalexpenses and interest losses resulting from the failure to execute.Additional damages, including consequential damages, arerecoverable to the extent provided in an express written agreementof the receiving bank, but are not otherwise recoverable.
(e) Reasonable attorney's fees are recoverable if demand forcompensation under subsection (a) or (b) is made and refused beforean action is brought on the claim. If a claim is made for breach of anagreement under subsection (d) and the agreement does not providefor damages, reasonable attorney's fees are recoverable if demand forcompensation under subsection (d) is made and refused before anaction is brought on the claim.
(f) Except as stated in this section, the liability of a receiving bankunder subsections (a) and (b) may not be varied by agreement.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-401
"Payment date"
Sec. 401. "Payment date" of a payment order means the day onwhich the amount of the order is payable to the beneficiary by thebeneficiary's bank. The payment date may be determined byinstruction of the sender but cannot be earlier than the day the orderis received by the beneficiary's bank and, unless otherwisedetermined, is the day the order is received by the beneficiary's bank.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-402 Obligation of sender to pay receiving bank
Sec. 402. (a) This section is subject to IC 26-1-4.1-205 andIC 26-1-4.1-207.
(b) With respect to a payment order issued to the beneficiary'sbank, acceptance of the order by the bank obliges the sender to paythe bank the amount of the order, but payment is not due until thepayment date of the order.
(c) This subsection is subject to subsection (e) and toIC 26-1-4.1-303. With respect to a payment order issued to areceiving bank other than the beneficiary's bank, acceptance of theorder by the receiving bank obliges the sender to pay the bank theamount of the sender's order. Payment by the sender is not due untilthe execution date of the sender's order. The obligation of that senderto pay its payment order is excused if the funds transfer is notcompleted by acceptance by the beneficiary's bank of a paymentorder instructing payment to the beneficiary of that sender's paymentorder.
(d) If the sender of a payment order pays the order and was notobliged to pay all or part of the amount paid, the bank receivingpayment is obliged to refund payment to the extent the sender wasnot obliged to pay. Except as provided in IC 26-1-4.1-204 andIC 26-1-4.1-304, interest is payable on the refundable amount fromthe 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 insubsection (d) but is unable to do so because not permitted byapplicable law or because the bank suspends payments, a sender inthe funds transfer that executed a payment order in compliance withan instruction, as stated in IC 26-1-4.1-302(a)(1), to route the fundstransfer through that intermediary bank is entitled to receive or retainpayment from the sender of the payment order that it accepted. Thefirst sender in the funds transfer that issued an instruction requiringrouting through that intermediary bank is subrogated to the right ofthe bank that paid the intermediary bank to refund as stated insubsection (d).
(f) The right of the sender of a payment order to be excused fromthe obligation to pay the order as stated in subsection (c) or toreceive refund under subsection (d) may not be varied by agreement.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-403
Payment by sender to receiving bank
Sec. 403. (a) Payment of the sender's obligation underIC 26-1-4.1-402 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 aFederal 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 bankto be credited;
payment occurs when the credit is withdrawn or, if notwithdrawn, at midnight of the day on which the credit iswithdrawable and the receiving bank learns of that fact.
(3) If the receiving bank debits an account of the sender withthe receiving bank, payment occurs when the debit is made tothe extent the debit is covered by a withdrawable credit balancein the account.
(b) If the sender and receiving bank are members of afunds-transfer system that nets obligations multilaterally amongparticipants, the receiving bank receives final settlement whensettlement is complete in accordance with the rules of the system.The obligation of the sender to pay the amount of a payment ordertransmitted through the funds-transfer system may be satisfied, to theextent permitted by the rules of the system, by setting off andapplying against the sender's obligation the right of the sender toreceive payment from the receiving bank of the amount of any otherpayment order transmitted to the sender by the receiving bankthrough the funds-transfer system. The aggregate balance ofobligations owed by each sender to each receiving bank in thefunds-transfer system may be satisfied, to the extent permitted by therules of the system, by setting off and applying against that balancethe aggregate balance of obligations owed to the sender by othermembers of the system. The aggregate balance is determined afterthe right of setoff stated in the second sentence of this subsection hasbeen exercised.
(c) If two banks transmit payment orders to each other under anagreement that settlement of the obligations of each bank to the otherunder IC 26-1-4.1-402 will be made at the end of the day or otherperiod, the total amount owed with respect to all orders transmittedby one bank shall be set off against the total amount owed withrespect to all orders transmitted by the other bank. To the extent ofthe setoff, each bank has made payment to the other.
(d) In a case not covered by subsection (a), the time whenpayment of the sender's obligation under IC 26-1-4.1-402(b) orIC 26-1-4.1-402(c) occurs is governed by applicable principles of law
that determine when an obligation is satisfied.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-404
Obligation of beneficiary's bank to pay and give notice tobeneficiary
Sec. 404. (a) Subject to IC 26-1-4.1-211(e), IC 26-1-4.1-405(d),and IC 26-1-4.1-405(e), if a beneficiary's bank accepts a paymentorder, the bank is obliged to pay the amount of the order to thebeneficiary of the order. Payment is due on the payment date of theorder, but if acceptance occurs on the payment date after the close ofthe funds-transfer business day of the bank, payment is due on thenext funds-transfer business day. If the bank refuses to pay afterdemand by the beneficiary and receipt of notice of particularcircumstances that will give rise to consequential damages as a resultof nonpayment, the beneficiary may recover damages resulting fromthe 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 reasonabledoubt concerning the right of the beneficiary to payment.
(b) If a payment order accepted by the beneficiary's bank instructspayment to an account of the beneficiary, the bank is obliged tonotify the beneficiary of receipt of the order before midnight of thenext funds-transfer business day following the payment date. If thepayment order does not instruct payment to an account of thebeneficiary, the bank is required to notify the beneficiary only ifnotice is required by the order. Notice may be given by first classmail or any other means reasonable in the circumstances. If the bankfails to give the required notice, the bank is obliged to pay interest tothe beneficiary on the amount of the payment order from the daynotice should have been given until the day the beneficiary learnedof receipt of the payment order by the bank. No other damages arerecoverable. Reasonable attorney's fees are also recoverable ifdemand for interest is made and refused before an action is broughton the claim.
(c) The right of a beneficiary to receive payment and damages asstated in subsection (a) may not be varied by agreement or afunds-transfer system rule. The right of a beneficiary to be notifiedas stated in subsection (b) may be varied by agreement of thebeneficiary or by a funds-transfer system rule if the beneficiary isnotified of the rule before initiation of the funds transfer.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-405
Payment by beneficiary's bank to beneficiary
Sec. 405. (a) If the beneficiary's bank credits an account of the
beneficiary of a payment order, payment of the bank's obligationunder IC 26-1-4.1-404(a) occurs when and to the extent (i) thebeneficiary is notified of the right to withdraw the credit, (ii) thebank lawfully applies the credit to a debt of the beneficiary, or (iii)funds with respect to the order are otherwise made available to thebeneficiary by the bank.
(b) If the beneficiary's bank does not credit an account of thebeneficiary of a payment order, the time when payment of the bank'sobligation under IC 26-1-4.1-404(a) occurs is governed by principlesof law that determine when an obligation is satisfied.
(c) Except as stated in subsections (d) and (e), if the beneficiary'sbank pays the beneficiary of a payment order under a condition topayment or agreement of the beneficiary giving the bank the right torecover payment from the beneficiary if the bank does not receivepayment of the order, the condition to payment or agreement is notenforceable.
(d) A funds-transfer system rule may provide that payments madeto beneficiaries of funds transfers made through the system areprovisional until receipt of payment by the beneficiary's bank of thepayment order it accepted. A beneficiary's bank that makes apayment that is provisional under the rule is entitled to refund fromthe beneficiary if (i) the rule requires that both the beneficiary andthe originator be given notice of the provisional nature of thepayment before the funds transfer is initiated, (ii) the beneficiary, thebeneficiary's bank and the originator's bank agreed to be bound bythe rule, and (iii) the beneficiary's bank did not receive payment ofthe payment order that it accepted. If the beneficiary is obliged torefund payment to the beneficiary's bank, acceptance of the paymentorder by the beneficiary's bank is nullified and no payment by theoriginator of the funds transfer to the beneficiary occurs underIC 26-1-4.1-406.
(e) This subsection applies to a funds transfer that includes apayment order transmitted over a funds-transfer system that (i) netsobligations multilaterally among participants, and (ii) has in effect aloss-sharing agreement among participants for the purpose ofproviding funds necessary to complete settlement of the obligationsof one or more participants that do not meet their settlementobligations. If the beneficiary's bank in the funds transfer accepts apayment order and the system fails to complete settlement pursuantto its rules with respect to any payment order in the funds transfer,(i) the acceptance by the beneficiary's bank is nullified and no personhas any right or obligation based on the acceptance, (ii) thebeneficiary's bank is entitled to recover payment from thebeneficiary, (iii) no payment by the originator to the beneficiaryoccurs under IC 26-1-4.1-406, and (iv) subject to IC 26-1-4.1-402(e),
each sender in the funds transfer is excused from its obligation to payits payment order under IC 26-1-4.1-402(c) because the fundstransfer has not been completed.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-406
Payment by originator to beneficiary; discharge of underlyingobligation
Sec. 406. (a) Subject to IC 26-1-4.1-211(e), IC 26-1-4.1-405(d),and IC 26-1-4.1-405(e), the originator of a funds transfer pays thebeneficiary of the originator's payment order (i) at the time apayment order for the benefit of the beneficiary is accepted by thebeneficiary's bank in the funds transfer and (ii) in an amount equalto the amount of the order accepted by the beneficiary's bank, but notmore than the amount of the originator's order.
(b) If payment under subsection (a) is made to satisfy anobligation, the obligation is discharged to the same extent dischargewould result from payment to the beneficiary of the same amount inmoney, unless (i) the payment under subsection (a) was made by ameans prohibited by the contract of the beneficiary with respect tothe obligation, (ii) the beneficiary, within a reasonable time afterreceiving notice of receipt of the order by the beneficiary's bank,notified the originator of the beneficiary's refusal of the payment,(iii) funds with respect to the order were not withdrawn by thebeneficiary or applied to a debt of the beneficiary, and (iv) thebeneficiary would suffer a loss that could reasonably have beenavoided if payment had been made by a means complying with thecontract. If payment by the originator does not result in dischargeunder this section, the originator is subrogated to the rights of thebeneficiary to receive payment from the beneficiary's bank underIC 26-1-4.1-404(a).
(c) For the purpose of determining whether discharge of anobligation occurs under subsection (b), if the beneficiary's bankaccepts a payment order in an amount equal to the amount of theoriginator's payment order less charges of one or more receivingbanks in the funds transfer, payment to the beneficiary is deemed tobe in the amount of the originator's order unless upon demand by thebeneficiary the originator does not pay the beneficiary the amount ofthe deducted charges.
(d) Rights of the originator or of the beneficiary of a fundstransfer under this section may be varied only by agreement of theoriginator and the beneficiary.
As added by P.L.189-1991, SEC.4.
IC 26-1-4.1-501 Variat