BUSINESS & COMMERCE CODE
CHAPTER 4A. FUNDS TRANSFERS
SUBCHAPTER A. SUBJECT MATTER AND DEFINITIONS
§ 4A.101. SHORT TITLE. This chapter may be cited as
Uniform Commercial Code--Funds Transfers.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.102. SUBJECT MATTER. Except as otherwise provided
in Section 4A.108, this chapter applies to funds transfers defined
in Section 4A.104.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.103. PAYMENT ORDER--DEFINITIONS. (a) In this
chapter:
(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:
(A) the instruction does not state a condition of
payment to the beneficiary other than the time of payment;
(B) the receiving bank is to be reimbursed by
debiting an account of, or otherwise receiving payment from, the
sender; and
(C) 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.104. FUNDS TRANSFER--DEFINITIONS. In this
chapter:
(1) "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.
(2) "Intermediary bank" means a receiving bank other
than the originator's bank or the beneficiary's bank.
(3) "Originator" means the sender of the first payment
order in a funds transfer.
(4) "Originator's bank" means:
(A) the receiving bank to which the payment order
of the originator is issued if the originator is not a bank; or
(B) the originator if the originator is a bank.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.105. OTHER DEFINITIONS. (a) In this chapter:
(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 chapter.
(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 clearinghouse, or other communication system of
a clearinghouse 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) Reserved.
(7) "Prove" with respect to a fact means to meet the
burden of establishing the fact (Section 1.201(b)(8)).
(b) Other definitions applying to this chapter and the
sections in which they appear are:
(1) "Acceptance." Section 4A.209.
(2) "Beneficiary." Section 4A.103.
(3) "Beneficiary's bank." Section 4A.103.
(4) "Executed." Section 4A.301.
(5) "Execution date." Section 4A.301.
(6) "Funds transfer." Section 4A.104.
(7) "Funds transfer system rule." Section 4A.501.
(8) "Intermediary bank." Section 4A.104.
(9) "Originator." Section 4A.104.
(10) "Originator's bank." Section 4A.104.
(11) "Payment by beneficiary's bank to beneficiary."
Section 4A.405.
(12) "Payment by originator to beneficiary." Section
4A.406.
(13) "Payment by sender to receiving bank." Section
4A.403.
(14) "Payment date." Section 4A.401.
(15) "Payment order." Section 4A.103.
(16) "Receiving bank." Section 4A.103.
(17) "Security procedure." Section 4A.201.
(18) "Sender." Section 4A.103.
(c) The following definitions in Chapter 4 apply to this
chapter:
(1) "Clearinghouse." Section 4.104.
(2) "Item." Section 4.104.
(3) "Suspends payments." Section 4.104.
(d) In addition, Chapter 1 contains general definitions and
principles of construction and interpretation applicable
throughout this chapter.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 13, eff. Sept. 1,
2003.
§ 4A.106. TIME PAYMENT ORDER IS RECEIVED. (a) The time
of receipt of a payment order or communication cancelling or
amending a payment order is determined by the rules applicable to
receipt of a notice stated in Section 1.202. A receiving bank may
fix a cutoff time or times on a funds transfer business day for the
receipt and processing of payment orders and communications
cancelling or amending payment orders. Different cutoff times may
apply to payment orders, cancellations, or amendments, or to
different categories of payment orders, cancellations, or
amendments. A cutoff time may apply to senders generally or
different cutoff times may apply to different senders or categories
of payment orders. If a payment order or communication cancelling
or amending a payment order is received after the close of a funds
transfer business day or after the appropriate cutoff 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 chapter 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 chapter.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 14, eff. Sept. 1,
2003.
§ 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 chapter to the extent
of the inconsistency.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.108. EXCLUSION OF CONSUMER TRANSACTIONS GOVERNED BY
FEDERAL LAW. This chapter does not apply to a funds transfer any
part of which is governed by the Electronic Fund Transfer Act, 15
U.S.C. § 1693 et seq., as amended from time to time.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
SUBCHAPTER B. ISSUE AND ACCEPTANCE OF PAYMENT ORDER
§ 4A.201. SECURITY PROCEDURE. "Security procedure"
means a procedure established by an agreement between a customer
and a receiving bank for the purpose of (i) verifying that a payment
order or communication amending or cancelling 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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:
(1) the security procedure was chosen by the customer
after the bank offered, and the customer refused, a security
procedure that was commercially reasonable for the customer; and
(2) 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 chapter 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
4A.203(a)(1), the rights and obligations arising under this section
or Section 4A.203 may not be varied by agreement.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.203. UNENFORCEABILITY OF CERTAIN VERIFIED PAYMENT
ORDERS. (a) If an accepted payment order is not, under Section
4A.202(a), an authorized order of a customer identified as sender,
but is effective as an order of the customer pursuant to Section
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:
(A) entrusted at any time with duties to act for
the customer with respect to payment orders or the security
procedure; or
(B) 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 4A.202, or (ii) not
enforceable, in whole or in part, against the customer under
Section 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 1.302(b), but the obligation of a
receiving bank to refund payment as stated in Subsection (a) may not
otherwise be varied by agreement.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 15, eff. Sept. 1,
2003.
§ 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 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 Subdivisions (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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 provided in Subsection (c), if the
beneficiary's bank does not know that the name and number refer to
different persons or if the funds transfer is processed by the
beneficiary bank in a fully automated manner, 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 any individual processing the funds transfer
on behalf of the beneficiary bank 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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
does not need to 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 4A.302(a)(1).
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 4A.405(a) or (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 4A.403(a)(1) or
(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 (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 4A.211(b), the
bank may recover from the beneficiary any payment received to the
extent allowed by the law governing mistake and restitution.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 under 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:
(1) any means complying with the agreement is
reasonable; and
(2) 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 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.211. CANCELLATION AND AMENDMENT OF PAYMENT
ORDER. (a) A communication of the sender of a payment order
cancelling 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
cancelling 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).
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 chapter, 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 chapter or by express agreement.
Liability based on acceptance arises only when acceptance occurs as
stated in Section 4A.209, and liability is limited to that provided
in this chapter. 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 chapter or by express
agreement.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
SUBCHAPTER C. EXECUTION OF SENDERS PAYMENT ORDER BY RECEIVING BANK
§ 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 date 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 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 amount.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 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 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 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
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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 4A.302 of this chapter 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 by Subsection (c), additional damages are not recoverable.
(b) If execution of a payment order by a receiving bank in
breach of Section 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) of this section, resulting
from the improper execution. Except as provided by 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) of this section is
made and refused before an action is brought on the claim.
(f) Except as provided by this section, the liability of a
receiving bank under Subsections (a) and (b) of this section may not
be varied by agreement.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
SUBCHAPTER D. PAYMENT
§ 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.402. OBLIGATION OF SENDER TO PAY RECEIVING
BANK. (a) This section is subject to Sections 4A.205 and 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 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 by Sections
4A.204 and 4A.304, interest is payable on the refundable amount
from the date of payment.
(e) If a funds transfer is not completed as provided by
Subsection (c) and an intermediary bank is obliged to refund
payment as provided by 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 provided by Section
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 a 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 a refund under Subsection (d) may not be varied by
agreement.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.403. PAYMENT BY SENDER TO RECEIVING
BANK. (a) Payment of the sender's obligation under Section
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 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 4A.402(b) or (c)
occurs is governed by applicable principles of law that determine
when an obligation is satisfied.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.404. OBLIGATION OF BENEFICIARY'S BANK TO PAY AND
GIVE NOTICE TO BENEFICIARY. (a) Subject to Sections 4A.211(e)
and 4A.405(d) and (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 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 4A.404(a) occurs when and to the extent:
(1) the beneficiary is notified of the right to
withdraw the credit;
(2) the bank lawfully applies the credit to a debt of
the beneficiary; or
(3) 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 4A.404(a) occurs is governed by
principles of law that determine when an obligation is satisfied.
(c) Except as provided by 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 through the system are
provisional until receipt of payment by the beneficiary's bank of
the payment order is 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 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:
(1) the acceptance by the beneficiary's bank is
nullified and no person has any right or obligation based on the
acceptance;
(2) the beneficiary's bank is entitled to recover
payment from the beneficiary;
(3) no payment by the originator to the beneficiary
occurs under Section 4A.406; and
(4) subject to Section 4A.402(e), each sender in the
funds transfer is excused from its obligation to pay its payment
order under Section 4A.402(c) because the funds transfer has not
been completed.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.406. PAYMENT BY ORIGINATOR TO BENEFICIARY;
DISCHARGE OF UNDERLYING OBLIGATION. (a) Subject to Sections
4A.211(e) and 4A.405(d) and (e), the originator of a funds transfer
pays the beneficiary of the originator's payment order:
(1) at the time a payment order for the benefit of the
beneficiary is accepted by the beneficiary's bank in the funds
transfer; and
(2) 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) of this
section 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 the 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 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
SUBCHAPTER E. MISCELLANEOUS PROVISIONS
§ 4A.501. VARIATION BY AGREEMENT AND EFFECT OF FUNDS
TRANSFER SYSTEM RULE. (a) Except as otherwise provided in this
chapter, 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 chapter, 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 chapter 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 4A.404(c), 4A.405(d), and 4A.507(c).
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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, and
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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 4A.506. RATE OF INTEREST. (a) If, under this
chapter, 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 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
§ 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 by each subdivision 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 as to matters of construction and interpretation,
whether or not the payment order or the funds transfer bears a
reasonable relation to that jurisdiction, and as to validity, to
the extent permitted by Section 1.301 of this code.
(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 (c) may govern, as to matters of
construction and interpretation, whether or not the 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.
Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.
Amended by Acts 2003, 78th Leg., ch. 542, § 16, eff. Sept. 1,
2003.
