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(810 ILCS 5/Art.
4A Pt. 2 heading)
PART
2. ISSUE AND ACCEPTANCE OF PAYMENT ORDER
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(810 ILCS 5/4A-201) (from Ch. 26,
par. 4A-201)
Sec. 4A-201. Security procedure. "Security
procedure" means a procedure established by agreement of
a customer and a receiving bank for the purpose of (i) verifying
that a payment order or communication amending or cancelling
a payment order is that of the customer, or (ii) detecting error
in the transmission or the content of the payment order or communication.
A security procedure may require the use of algorithms or other
codes, identifying words or numbers, encryption, callback procedures,
or similar security devices. Comparison of a signature on a payment
order or communication with an authorized specimen signature
of the customer is not by itself a security procedure.
(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-202) (from Ch. 26,
par. 4A-202)
Sec. 4A-202. Authorized and
verified payment orders.
(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 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.
(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 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.
(d) 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 (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 Section 4A-203(a)(1), rights and obligations
arising under this Section or Section 4A-203 may not be
varied by agreement.
(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-203) (from Ch. 26,
par. 4A-203)
Sec. 4A-203. Unenforceability
of certain verified payment orders.
(a) If an accepted payment order
is not, under Section 4A-202(a), an authorized order of
a customer identified as sender, but is effective as an order
of the customer pursuant to Section 4A-202(b), the following
rules apply:
(1) By
express written agreement, the receiving bank
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may limit the extent to which it is
entitled to enforce or retain payment of the payment
order.
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(2)
The receiving bank is not entitled to enforce or
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retain payment of the payment order
if the customer proves that the order was not caused,
directly or indirectly, by a person (i) entrusted
at any time with duties to act for the customer
with respect to payment orders or the security
procedure, or (ii) who obtained access to transmitting
facilities of the customer or who obtained, from
a source controlled by the customer and without
authority of the receiving bank, information facilitating
breach of the security procedure, regardless of
how the information was obtained or whether the
customer was at fault. Information includes any
access device, computer software, or the like.
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(b) This Section
applies to amendments of payment orders to the same extent
it applies to payment orders.
(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-204) (from Ch. 26,
par. 4A-204)
Sec. 4A-204. Refund of payment
and duty of customer to report with respect to an unauthorized
payment order.
(a) If a receiving bank accepts
a payment order issued in the name of its customer as sender
which is (i) not authorized and not effective as the order of
the customer under Section 4A-202, or (ii) not enforceable,
in whole or in part, against the customer under Section 4A-203,
the bank shall refund any payment of the payment order received
from the customer to the extent the bank is not entitled to enforce
payment and shall pay interest on the refundable amount calculated
from the date the bank received payment to the date of the refund.
However, the customer is not entitled to interest from the bank
on the amount to be refunded if the customer fails to exercise
ordinary care to determine that the order was not authorized
by the customer and to notify the bank of the relevant facts
within a reasonable time not exceeding 90 days after the date
the customer received notification from the bank that the order
was accepted or that the customer's account was debited with
respect to the order. The bank is not entitled to any recovery
from the customer on account of a failure by the customer to
give notification as stated in this Section.
(b) Reasonable time under subsection
(a) may be fixed by agreement as stated in Section 1-204(1),
but the obligation of a receiving bank to refund payment as stated
in subsection (a) may not otherwise be varied by agreement.
(Source: P.A. 90-655, eff. 7-30-98.)
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(810 ILCS 5/4A-205) (from Ch. 26, par. 4A-205)
Sec. 4A-205. Erroneous payment
orders.
(a) If an accepted payment order
was transmitted pursuant to a security procedure for the detection
of error and the payment order (i) erroneously instructed payment
to a beneficiary not intended by the sender, (ii) erroneously
instructed payment in an amount greater than the amount intended
by the sender, or (iii) was an erroneously transmitted duplicate
of a payment order previously sent by the sender, the following
rules apply:
(1) If
the sender proves that the sender or a person
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acting on behalf of the sender pursuant
to Section 4A-206 complied with the security
procedure and that the error would have been detected
if the receiving bank had also complied, the sender
is not obliged to pay the order to the extent stated
in paragraphs (2) and (3).
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(2)
If the funds transfer is completed on the basis
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of an erroneous payment order described
in clause (i) or (iii) of subsection (a), the sender
is not obliged to pay the order and the receiving
bank is entitled to recover from the beneficiary
any amount paid to the beneficiary to the extent
allowed by the law governing mistake and restitution.
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(3)
If the funds transfer is completed on the basis
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of a payment order described in clause
(ii) of subsection (a), the sender is not obliged
to pay the order to the extent the amount received
by the beneficiary is greater than the amount intended
by the sender. In that case, the receiving bank
is entitled to recover from the beneficiary the
excess amount received to the extent allowed by
the law governing mistake and restitution.
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(b) If (i) the
sender of an erroneous payment order described in subsection
(a) is not obliged to pay all or part of the order, and
(ii) the sender receives notification from the receiving
bank that the order was accepted by the bank or that the
sender's account was debited with respect to the order,
the sender has a duty to exercise ordinary care, on the
basis of information available to the sender, to discover
the error with respect to the order and to advise the bank
of the relevant facts within a reasonable time, not exceeding
90 days, after the bank's notification was received by
the sender. If the bank proves that the sender failed to
perform that duty, the sender is liable to the bank for
the loss the bank proves it incurred as a result of the
failure, but the liability of the sender may not exceed
the amount of the sender's order.
(c) This Section applies to amendments
to payment orders to the same extent it applies to payment orders.
(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-206) (from Ch. 26, par. 4A-206)
Sec. 4A-206. Transmission
of payment order through funds transfer or other communication
system.
(a) If a payment order addressed
to a receiving bank is transmitted to a funds transfer system
or other third-party communication system for transmittal
to the bank, the system is deemed to be an agent of the sender
for the purpose of transmitting the payment order to the bank.
If there is a discrepancy between the terms of the payment order
transmitted to the system and the terms of the payment order
transmitted by the system to the bank, the terms of the payment
order of the sender are those transmitted by the system. This
Section does not apply to a funds transfer system of the Federal
Reserve Banks.
(b) This Section applies to cancellations
and amendments of payment orders to the same extent it applies
to payment orders.
(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-207) (from Ch. 26, par. 4A-207)
Sec. 4A-207. Misdescription
of beneficiary.
(a) Subject to subsection (b),
if, in a payment order received by the beneficiary's bank, the
name, bank account number, or other identification of the beneficiary
refers to a nonexistent or unidentifiable person or account,
no person has rights as a beneficiary of the order and acceptance
of the order cannot occur.
(b) If a payment order received
by the beneficiary's bank identifies the beneficiary both by
name and by an identifying or bank account number and the name
and number identify different persons, the following rules apply:
(1) Except
as otherwise provided in subsection (c),
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if the beneficiary's bank does not know
that the name and number refer to different persons,
it may rely on the number as the proper identification
of the beneficiary of the order. The beneficiary's
bank need not determine whether the name and number
refer to the same person.
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(2)
If the beneficiary's bank pays the person
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identified by name or knows that the
name and number identify different persons, no
person has rights as beneficiary except the person
paid by the beneficiary's bank if that person was
entitled to receive payment from the originator
of the funds transfer. If no person has rights
as beneficiary, acceptance of the order cannot
occur.
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(c) If (i) a payment
order described in subsection (b) is accepted, (ii) the
originator's payment order described the beneficiary inconsistently
by name and number, and (iii) the beneficiary's bank pays
the person identified by number as permitted by subsection
(b)(1), the following rules apply:
(1) If
the originator is a bank, the originator is
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obligated to pay its order.
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(2)
If the originator is not a bank and proves that
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the person identified by number was
not entitled to receive payment from the originator,
the originator is not obliged to pay its order
unless the originator's bank proves that the originator,
before acceptance of the originator's order, had
notice that payment of a payment order issued by
the originator might be made by the beneficiary's
bank on the basis of an identifying or bank account
number event if it identifies a person different
from the named beneficiary. Proof of notice may
be made by any admissible evidence. The originator's
bank satisfies the burden as proof if it proves
that the originator, before the payment order was
accepted, signed a writing stating the information
to which the notice relates.
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(d) In a case
governed by subsection (b)(1), if the beneficiary's bank
rightfully pays the person identified by number and that
person was not entitled to receive payment from the originator,
the amount paid may be recovered from that person to the
extent allowed by the law governing mistake and restitution
as follows:
(1) If
the originator is obligated to pay its
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payment order as stated in subsection
(c), the originator has the right to recover.
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(2)
If the originator is not a bank and is not
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obligated to pay its payment order,
the originator's bank has the right to recover.
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(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-208) (from Ch. 26, par. 4A-208)
Sec. 4A-208. Misdescription
of intermediary bank or beneficiary's bank.
(a) This subsection applies to
a payment order identifying an intermediary bank or the beneficiary's
bank only by an identifying number.
(1) The
receiving bank may rely on the number as the
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proper identification of the intermediary
or beneficiary's bank and need not determine whether
the number identifies a bank.
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(2)
The sender is obliged to compensate the
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receiving bank for any loss and expenses
incurred by the receiving bank as a result of its
reliance on the number in executing or attempting
to execute the order.
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(b) This subsection
applies to a payment order identifying an intermediary
bank or the beneficiary's bank both by name and an identifying
number if the name and number identify different persons.
(1) If
the sender is a bank, the receiving bank may
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rely on the number as the proper identification
of the intermediary or beneficiary's bank if the
receiving bank, when it executes the sender's order,
does not know that the name and number identify
different persons. The receiving bank need not
determine whether the name and number refer to
the same person or whether the number refers to
a bank. The sender is obliged to compensate the
receiving bank for any loss and expenses incurred
by the receiving bank as a result of its reliance
on the number in executing or attempting to execute
the order.
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(2)
If the sender is not a bank and the receiving
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bank proves that the sender, before
the payment order was accepted, had notice that
the receiving bank might rely on the number as
the proper identification of the intermediary or
beneficiary's bank even if it identifies a person
different from the bank identified by name, the
rights and obligations of the sender and the receiving
bank are governed by subsection (b)(1), as though
the sender were a bank. Proof of notice may be
made by any admissible evidence. The receiving
bank satisfies the burden of proof if it proves
that the sender, before the payment order was accepted,
signed a writing stating the information to which
the notice relates.
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(3)
Regardless of whether the sender is a bank, the
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receiving bank may rely on the name
as the proper identification of the intermediary
or beneficiary's bank if the receiving bank, at
the time it executes the sender's order, does not
know that the name and number identify different
persons. The receiving bank need not determine
whether the name and number refer to the same person.
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(4)
If the receiving bank knows that the name and
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number identify different persons, reliance
on either the name or the number in executing the
sender's payment order is a breach of the obligation
stated in Section 4A-302(a)(1).
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(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-209) (from Ch. 26, par. 4A-209)
Sec. 4A-209. Acceptance of
payment order.
(a) Subject to subsection (d),
a receiving bank other than the beneficiary's bank accepts a
payment order when it executes the order.
(b) Subject to subsections (c)
and (d), a beneficiary's bank accepts a payment order at the
earliest of the following times:
(1) when
the bank (i) pays the beneficiary as stated
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in Section 4A-405(a) or 4A-405(b),
or (ii) notifies the beneficiary of receipt of
the order or that the account of the beneficiary
has been credited with respect to the order unless
the notice indicates that the bank is rejecting
the order or that funds with respect to the order
may not be withdrawn or used until receipt of payment
from the sender of the order;
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(2)
when the bank receives payment of the entire
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amount of the sender's order pursuant
to Section 4A-403 (a)(1) or 4A-403(a)(2);
or
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(3)
the opening of the next funds transfer business
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day of the bank following the payment
date of the order if, at that time, the amount
of the sender's order is fully covered by a withdrawable
credit balance in an authorized account of the
sender or the bank has otherwise received full
payment from the sender, unless the order was rejected
before that time or is rejected within (i) one
hour after that time, or (ii) one hour after the
opening of the next business day of the sender
following the payment date if that time is later.
If notice of rejection is received by the sender
after the payment date and the authorized account
of the sender does not bear interest, the bank
is obliged to pay interest to the sender on the
amount of the order for the number of days elapsing
after the payment date to the day the sender receives
notice or learns that the order was not accepted,
counting that day as an elapsed day. If the withdrawable
credit balance during that period falls below the
amount of the order, the amount of interest payable
is reduced accordingly.
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(c) Acceptance
of a payment order cannot occur before the order is received
by the receiving bank. Acceptance does not occur under
subsection (b)(2) or (b)(3) if the beneficiary of the payment
order does not have an account with the receiving bank,
the account has been closed, or the receiving bank is not
permitted by law to receive credits for the beneficiary's
account.
(d) A payment order issued to the
originator's bank cannot be accepted until the payment date if
the bank is the beneficiary's bank, or the execution date if the
bank is not the beneficiary's bank. If the originator's bank executes
the originator's payment order before the execution date or pays
the beneficiary of the originator's payment order before the payment
date and the payment order is subsequently canceled pursuant to
Section 4A-211(b), the bank may recover from the beneficiary
any payment received to the extent allowed by the law governing
mistake and restitution.
(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-210) (from Ch. 26, par. 4A-210)
Sec. 4A-210. Rejection of
payment order.
(a) A payment order is rejected
by the receiving bank by a notice of rejection transmitted to
the sender orally, electronically, or in writing. A notice of
rejection need not use any particular words and is sufficient
if it indicates that the receiving bank is rejecting the order
or will not execute or pay the order. Rejection is effective
when the notice is given if transmission is by a means that is
reasonable in the circumstances. If notice of rejection is given
by a means that is not reasonable, rejection is effective when
the notice is received. If an agreement of the sender and receiving
bank establishes the means to be used to reject a payment order,
(i) any means complying with the agreement is reasonable and
(ii) any means not complying is not reasonable unless no significant
delay in receipt of the notice resulted from the use of the noncomplying
means.
(b) This subsection applies if
a receiving bank other than the beneficiary's bank fails to execute
a payment order despite the existence on the execution date of
a withdrawable credit balance in an authorized account of the
sender sufficient to cover the order. If the sender does not
receive notice of rejection of the order on the execution date
and the authorized account of the sender does not bear interest,
the bank is obliged to pay interest to the sender on the amount
of the order for the number of days elapsing after the execution
date to the earlier of the day the order is canceled pursuant
to Section 4A-211(d) or the day the sender receives notice
or learns that the order was not executed, counting the final
day of the period as an elapsed day. If the withdrawable credit
balance during that period falls below the amount of the order,
the amount of interest is reduced accordingly.
(c) If a receiving bank suspends
payments, all unaccepted payment orders issued to it are deemed
rejected at the time the bank suspends payments.
(d) Acceptance of a payment order
precludes a later rejection of the order. Rejection of a payment
order precludes a later acceptance of the order.
(Source: P.A. 86-1291.)
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(810 ILCS 5/4A-211) (from Ch. 26, par. 4A-211)
Sec. 4A-211. Cancellation
and amendment of payment order.
(a) A communication of the sender
of a payment order cancelling or amending the order may be transmitted
to the receiving bank orally, electronically, or in writing.
If a security procedure is in effect between the sender and the
receiving bank, the communication is not effective to cancel
or amend the order unless the communication is verified pursuant
to the security procedure or the bank agrees to the cancellation
or amendment.
(b) Subject to subsection (a),
a communication by the sender cancelling or amending a payment
order is effective to cancel or amend the order if notice of
the communication is received at a time and in a manner affording
the receiving bank a reasonable opportunity to act on the communication
before the bank accepts the payment order.
(c) After a payment order has been
accepted, cancellation or amendment of the order is not effective
unless the receiving bank agrees or a funds transfer system rule
allows cancellation or amendment without agreement of the bank.
(1) With
respect to a payment order accepted by a
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receiving bank other than the beneficiary's
bank, cancellation or amendment is not effective
unless a conforming cancellation or amendment of
the payment order issued by the receiving bank
is also made.
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(2)
With respect to a payment order accepted by the
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beneficiary's bank, cancellation or
amendment is not effective unless the order was
issued in execution of an unauthorized payment
order, or because of a mistake by a sender in the
funds transfer which resulted in the issuance of
a payment order (i) that is a duplicate of a payment
order previously issued by the sender, (ii) that
orders payment to a beneficiary not entitled to
receive payment from the originator, or (iii) that
orders payment in an amount greater that the amount
the beneficiary was entitled to receive from the
originator. If the payment order is canceled or
amended, the beneficiary's bank is entitled to
recover from the beneficiary any amount paid to
the beneficiary to the extent allowed by the law
governing mistake and restitution.
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