California Commercial Code 11202 – (a) A payment order received by the receiving bank is the …
(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.
Terms Used In California Commercial Code 11202
- agreement: means the total legal obligation that results from the parties' agreement as determined by this code and as supplemented by any other applicable laws. See California Commercial Code 1201
- Bank: means a person engaged in the business of banking, and includes a savings bank, savings and loan association, credit union, and trust company. See California Commercial Code 1201
- Person: means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. See California Commercial Code 1201
- Record: means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. See California Commercial Code 1201
- Term: means a portion of an agreement that relates to a particular matter. See California Commercial Code 1201
(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 division includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under subdivision (a), or it is effective as the order of the customer under subdivision (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 paragraph (1) of subdivision (a) of Section 11203, rights and obligations arising under this section or Section 11203 may not be varied by agreement.
(Amended by Stats. 2023, Ch. 210, Sec. 83. (SB 95) Effective January 1, 2024.)