§ 4-4.5-205 — Erroneous payment orders

Colorado § 4-4.5-205

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

Text

(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 4-4.5-206 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 paragraphs (2) and
(3) of this subsection (a).

(2) If the funds transfer is completed on the basis of an erroneous payment
order described in clause (i) or (iii) of subsection (a) of this section, 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) of this section, 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)
of this section 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 ninety 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.

Legislative History

Source: L. 90: Entire article added, p. 347, � 1, effective January 1, 1991.