70A-4a-202 - Authorized and verified payment orders.
70A-4a-202. Authorized and verified payment orders.
(1) A payment order received by the receiving bank is the authorized order of the personidentified as sender if that person authorized the order or is otherwise bound by it under the lawof agency.
(2) (a) If a bank and its customer have agreed that the authenticity of payment ordersissued to the bank in the name of the customer as sender will be verified pursuant to a securityprocedure, a payment order received by the receiving bank is effective as the order of thecustomer, whether or not authorized, if:
(i) the security procedure is a commercially reasonable method of providing securityagainst unauthorized payment orders; and
(ii) the bank proves that it accepted the payment order in good faith and in compliancewith the security procedure and any written agreement or instruction of the customer restrictingacceptance of payment orders issued in the name of the customer.
(b) The bank is not required to follow an instruction that violates a written agreementwith the customer or notice of which is not received at a time and in a manner affording the banka reasonable opportunity to act on it before the payment order is accepted.
(3) Commercial reasonableness of a security procedure is a question of law to bedetermined by considering the wishes of the customer expressed to the bank, the circumstancesof the customer known to the bank, including the size, type, and frequency of payment ordersnormally issued by the customer to the bank, alternative security procedures offered to thecustomer, and security procedures in general use by customers and receiving banks similarlysituated. A security procedure is considered to be commercially reasonable if:
(a) the security procedure was chosen by the customer after the bank offered, and thecustomer refused, a security procedure that was commercially reasonable for that customer; and
(b) the customer expressly agreed in writing to be bound by any payment order, whetheror not authorized, issued in its name, and accepted by the bank in compliance with the securityprocedure chosen by the customer.
(4) The term "sender" in this chapter includes the customer in whose name a paymentorder is issued if the order is the authorized order of the customer under Subsection (1), or it iseffective as the order of the customer under Subsection (2).
(5) This section applies to amendments and cancellations of payment orders to the sameextent it applies to payment orders.
(6) Except as provided in this section and in Subsection 70A-4a-203(2), rights andobligations arising under this section or Section 70A-4a-203 may not be varied by agreement.
Enacted by Chapter 294, 1990 General Session