§ 26-1-4.1-202 — Authorized and verified payment orders; security procedures; commercial reasonableness

Indiana § 26-1-4.1-202

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 4.1: Fund 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 IC 26-1-4.1 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 IC 26-1-4.1-203(a)(1),
rights and obligations arising under this section or IC 26-1-4.1-203 may
not be varied by agreement.

Legislative History

As added by P.L.189-1991, SEC.4. Amended by P.L.199-2023, SEC.24.