§ 4-4.5-405 — Payment by beneficiary's bank to beneficiary

Colorado § 4-4.5-405

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

Text

(a) If the
beneficiary's bank credits an account of the beneficiary of a payment order,
payment of the bank's obligation under section 4-4.5-404(a) occurs when and to
the extent (i) the beneficiary is notified of the right to withdraw the credit, (ii) the
bank lawfully applies the credit to a debt of the beneficiary, or (iii) 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 4-4.5-404(a) occurs is governed by principles of law that determine when an
obligation is satisfied.

(c) Except as stated in subsections (d) and (e) of this section, 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 made through the system are provisional until
receipt of payment by the beneficiary's bank of the payment order it 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 4-4.5-406.

(e) This subsection (e) 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, (i) the acceptance by the
beneficiary's bank is nullified and no person has any right or obligation based on the
acceptance, (ii) the beneficiary's bank is entitled to recover payment from the
beneficiary, (iii) no payment by the originator to the beneficiary occurs under
section 4-4.5-406, and (iv) subject to section 4-4.5-402(e), each sender in the funds
transfer is excused from its obligation to pay its payment order under section 4-4.5-402(c) because the funds transfer has not been completed.

Legislative History

Source: L. 90: Entire article added, p. 358, � 1, effective January 1, 1991.