Michigan Laws 440.4702 – Authorized payment order; verification by security procedure; determination of commercial reasonableness; “sender” defined; applicability of section to amendments and cancellations of payment orders;
Current as of: 2023 | Check for updates
|
Other versions
(1) 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.
(2) 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 security procedure and any written agreement or instruction of the customer restricting acceptance of payment orders issued in the name of the customer. The bank is not required to follow an instruction that violates a written agreement with the customer 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 Michigan Laws 440.4702
- 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 Michigan Laws 440.4605
- Customer: means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders. See Michigan Laws 440.4605
- Good faith: except as otherwise provided in article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing. See Michigan Laws 440.1201
- Payment order: means an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if the following apply:
(i) The instruction does not state a condition to payment to the beneficiary other than time of payment. See Michigan Laws 440.4603Person: means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity. See Michigan Laws 440.1201 Receiving bank: means the bank to which the sender's instruction is addressed. See Michigan Laws 440.4603 Sender: means the person giving the instruction to the receiving bank. See Michigan Laws 440.4603 Term: means a portion of an agreement that relates to a particular matter. See Michigan Laws 440.1201 writing: includes printing, typewriting, or any other intentional reduction to tangible form. See Michigan Laws 440.1201
(3) 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 writing to be bound by any payment order, whether or not authorized, issued in its name and accepted by the bank in compliance with the security procedure chosen by the customer.
(4) The term “sender” in this article includes the customer in whose name a payment order is issued if the order is the authorized order of the customer under subsection (1), or it is effective as the order of the customer under subsection (2).
(5) This section applies to amendments and cancellations of payment orders to the same extent it applies to payment orders.
(6) Except as provided in this section and in section 4A203(1)(a), rights and obligations arising under this section or section 4A203 may not be varied by agreement.