§ 26-1-4-406 — Customer's duty to discover and report unauthorized signature or alteration

Indiana § 26-1-4-406

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 4: Bank Deposits and Collections

Text

(a) A bank that sends or makes available to
a customer a statement of account showing payment of items for the
account shall either return or make available to the customer the items
paid or provide information in the statement of account sufficient to
allow the customer reasonably to identify the items paid. The statement
of account provides sufficient information if the item is described by
item number, amount, and date of payment.
(b) If the items are not returned to the customer, the person retaining
the items shall either retain the items or, if the items are destroyed,
maintain the capacity to furnish legible copies of the items until the
expiration of seven (7) years after receipt of the items. A customer may
request an item from the bank that paid the item, and that bank must
provide in a reasonable time either the item or, if the item has been
destroyed or is not otherwise obtainable, a legible copy of the item.
(c) If a bank sends or makes available a statement of account or
items under subsection (a), the customer must exercise reasonable
promptness in examining the statement or the items to determine
whether any payment was not authorized because of an alteration of an
item or because a purported signature by or on behalf of the customer
was not authorized. If, based on the statement or items provided, the
customer should reasonably have discovered the unauthorized
payment, the customer must promptly notify the bank of the relevant
facts.
(d) If the bank proves that the customer failed, with respect to an
item, to comply with the duties imposed on the customer by subsection
(c) the customer is precluded from asserting against the bank:
(1) the customer's unauthorized signature or any alteration on the
item, if the bank also proves that it suffered a loss by reason of the
failure; and
(2) the customer's unauthorized signature or alteration by the
same wrongdoer on any other item paid in good faith by the bank
if the payment was made before the bank received notice from the
customer of the unauthorized signature or alteration and after the
customer had been afforded a reasonable period of time, not
exceeding thirty (30) days, in which to examine the item or
statement of account and notify the bank.
(e) If subsection (d) applies and the customer proves that the bank
failed to exercise ordinary care in paying the item and that the failure
substantially contributed to loss, the loss is allocated between the
customer precluded and the bank asserting the preclusion according to
the extent to which the failure of the customer to comply with
subsection (c) and the failure of the bank to exercise ordinary care
contributed to the loss. If the customer proves that the bank did not pay
the item in good faith, the preclusion under subsection (d) does not
apply.
(f) Without regard to care or lack of care of either the customer or
the bank, a customer who does not within one (1) year after the
statement or items are made available to the customer (subsection (a))
discover and report the customer's unauthorized signature on or any
alteration on the item is precluded from asserting against the bank the
unauthorized signature or alteration. If there is a preclusion under this
subsection, the payor bank may not recover for breach of warranty
under IC 26-1-4-208 with respect to the unauthorized signature or
alteration to which the preclusion applies.
Formerly: Acts 1963, c.317, s.4-406. As amended by
P.L.222-1993, SEC.40.