§ 4-4.5-202 — Authorized and verified payment orders

Colorado § 4-4.5-202

• Jurisdiction: Colorado
• Title 04: Uniform
• Art.: Funds Transfers

Text

(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 bank's obligations under the security
procedure and any agreement or instruction of the customer, evidenced by a
record, restricting acceptance of payment orders issued in the name of the
customer. The bank is not required to follow an instruction that violates an
agreement with the customer, evidenced by a record, 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 (i) the security procedure
was chosen by the customer after the bank offered, and the customer refused, a
security procedure that was commercially reasonable for that customer and (ii) the
customer expressly agreed in a record to be bound by any payment order, whether
or not authorized, issued in its name and accepted by the bank in compliance with
the bank's obligations under the security procedure chosen by the customer.

(d) The term sender in this article includes the customer in whose name a
payment order is issued if the order is the authorized order of the customer under
subsection (a) of this section, or it is effective as the order of the customer under
subsection (b) of this section.

(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 4-4.5-203 (a)(1), rights
and obligations arising under this section or section 4-4.5-203 may not be varied by
agreement.

Legislative History

Source: L. 90: Entire article added, p. 345, � 1, effective January 1, 1991. L. 2023: (b) and (c) amended, (SB 23-090), ch. 136, p. 532, � 26, effective August 7.