- Consolidated Laws - Uniform Commercial Code
PART 5
MISCELLANEOUS PROVISIONS
Section 4-A-501. Variation by Agreement and Effect of Funds-Transfer
System Rule
Section 4-A-502. Creditor Process Served on Receiving Bank; Set Off by
Beneficiary`s Bank
Section 4-A-503. Injunction or Restraining Order with Respect to Funds
Transfer
Section 4-A-504. Order in Which Items and Payment Orders May Be Charged
to Account; Order of Withdrawals From Account
Section 4-A-505. Preclusion of Objection to Debit of Customer`s Account
Section 4-A-506. Rate of Interest
Section 4-A-507. Choice of Law
Section 4-A-501. Variation by Agreement and Effect of Funds-Transfer
System Rule.
(1) Except as otherwise provided in this Article, the rights and
obligations of a party to a funds transfer may be varied by agreement of
the affected party.
(2) "Funds-transfer system rule" means a rule of an association of
banks (i) governing transmission of payment orders by means of a
funds-transfer system of the association or rights and obligations with
respect to those orders, or (ii) to the extent the rule governs rights
and obligations between banks that are parties to a funds transfer in
which a Federal Reserve Bank, acting as an intermediary bank, sends a
payment order to the beneficiary`s bank. Except as otherwise provided in
this Article, a funds-transfer system rule governing rights and
obligations between participating banks using the system may be
effective even if the rule conflicts with this Article and indirectly
affects another party to the funds transfer who does not consent to the
rule. A funds-transfer system rule may also govern rights and
obligations of parties other than participating banks using the system
to the extent stated in subsection (3) of Section 4-A-404, subsection
(4) of Section 4-A-405, and subsection (3) of Section 4-A-507.
Section 4-A-502. Creditor Process Served on Receiving Bank; Set Off by
Beneficiary`s Bank.
(1) As used in this section, "creditor process" means levy,
attachment, garnishment, notice of lien, sequestration, or similar
process issued by or on behalf of a creditor or other claimant with
respect to an account.
(2) This subsection applies to creditor process with respect to an
authorized account of the sender of a payment order if the creditor
process is served on the receiving bank. For the purpose of determining
rights with respect to the creditor process, if the receiving bank
accepts the payment order the balance in the authorized account is
deemed to be reduced by the amount of the payment order to the extent
the bank did not otherwise receive payment of the order, unless the
creditor process is served at a time and in a manner affording the bank
a reasonable opportunity to act on it before the bank accepts the
payment order.
(3) If a beneficiary`s bank has received a payment order for payment
to the beneficiary`s account in the bank, the following rules apply:
(a) The bank may credit the beneficiary`s account. The amount
credited may be set off against an obligation owed by the
beneficiary to the bank or may be applied to satisfy creditor
process served on the bank with respect to the account.
(b) The bank may credit the beneficiary`s account and allow
withdrawal of the amount credited unless creditor process
with respect to the account is served at a time and in a
manner affording the bank a reasonable opportunity to act to
prevent withdrawal.
(c) If creditor process with respect to the beneficiary`s account
has been served and the bank has had a reasonable opportunity
to act on it, the bank may not reject the payment order
except for a reason unrelated to the service of process.
(4) Creditor process with respect to a payment by the originator to
the beneficiary pursuant to a funds transfer may be served only on the
beneficiary`s bank with respect to the debt owed by that bank to the
beneficiary. Any other bank served with the creditor process is not
obliged to act with respect to the process.
Section 4-A-503. Injunction or Restraining Order With Respect to Funds
Transfer.
For proper cause and in compliance with applicable law, a court may
restrain (i) a person from issuing a payment order to initiate a funds
transfer, (ii) an originator`s bank from executing the payment order of
the originator, or (iii) the beneficiary`s bank from releasing funds to
the beneficiary or the beneficiary from withdrawing the funds. A court
may not otherwise restrain a person from issuing a payment order, paying
or receiving payment of a payment order, or otherwise acting with
respect to a funds transfer.
Section 4-A-504. Order in Which Items and Payment Orders May Be Charged
to Account; Order of Withdrawals From Account.
(1) If a receiving bank has received more than one payment order of
the sender or one or more payment orders and other items that are
payable from the sender`s account, the bank may charge the sender`s
account with respect to the various orders and items in any sequence.
(2) In determining whether a credit to an account has been withdrawn
by the holder of the account or applied to a debt of the holder of the
account, credits first made to the account are first withdrawn or
applied.
Section 4-A-505. Preclusion of Objection to Debit of Customer`s
Account.
If a receiving bank has received payment from its customer with
respect to a payment order issued in the name of the customer as sender
and accepted by the bank, and the customer received notification
reasonably identifying the order, the customer is precluded from
asserting that the bank is not entitled to retain the payment unless the
customer notifies the bank of the customer`s objection to the payment
within one year after the notification was received by the customer.
Section 4-A-506. Rate of Interest.
(1) If, under this Article, a receiving bank is obliged to pay
interest with respect to a payment order issued to the bank, the amount
payable may be determined (i) by agreement of the sender and receiving
bank, or (ii) by a funds-transfer system rule if the payment order is
transmitted through a funds-transfer system.
(2) If the amount of interest is not determined by an agreement or
rule as stated in subsection (l), the amount is calculated by
multiplying the applicable Federal Funds rate by the amount on which
interest is payable, and then multiplying the product by the number of
days for which interest is payable. The applicable Federal Funds rate is
the average of the Federal Funds rates published by the Federal Reserve
Bank of New York for each of the days for which interest is payable
divided by 360. The Federal Funds rate for any day on which a published
rate is not available is the same as the published rate for the next
preceding day for which there is a published rate. If a receiving bank
that accepted a payment order is required to refund payment to the
sender of the order because the funds transfer was not completed, but
the failure to complete was not due to any fault by the bank, the
interest payable is reduced by a percentage equal to the reserve
requirement on deposits of the receiving bank.
Section 4-A-507. Choice of Law.
(1) The following rules apply unless the affected parties otherwise
agree or subsection (3) applies:
(a) The rights and obligations between the sender of a payment
order and the receiving bank are governed by the law of the
jurisdiction in which the receiving bank is located.
(b) The rights and obligations between the beneficiary`s bank and
the beneficiary are governed by the law of the jurisdiction
in which the beneficiary`s bank is located.
(c) The issue of when payment is made pursuant to a funds
transfer by the originator to the beneficiary is governed by
the law of the jurisdiction in which the beneficiary`s bank
is located.
(2) If the parties described in each paragraph of subsection (1) have
made an agreement selecting the law of a particular jurisdiction to
govern rights and obligations between each other, the law of that
jurisdiction governs those rights and obligations, whether or not the
payment order or the funds transfer bears a reasonable relation to that
jurisdiction.
(3) A funds-transfer system rule may select the law of a particular
jurisdiction to govern (i) rights and obligations between participating
banks with respect to payment orders transmitted or processed through
the system, or (ii) the rights and obligations of some or all parties to
a funds transfer any part of which is carried out by means of the
system. A choice of law made pursuant to clause (i) is binding on
participating banks. A choice of law made pursuant to clause (ii) is
binding on the originator, other sender, or a receiving bank having
notice that the funds-transfer system might be used in the funds
transfer and of the choice of law by the system when the originator,
other sender, or receiving bank issued or accepted a payment order. The
beneficiary of a funds transfer is bound by the choice of law if, when
the funds transfer is initiated, the beneficiary has notice that the
funds-transfer system might be used in the funds transfer and of the
choice of law by the system. The law of a jurisdiction selected pursuant
to this subsection may govern, whether or not that law bears a
reasonable relation to the matter in issue.
(4) In the event of inconsistency between an agreement under
subsection (2) and a choice-of-law rule under subsection (3), the
agreement under subsection (2) prevails.
(5) If a funds transfer is made by use of more than one funds-transfer
system and there is inconsistency between choice-of-law rules of the
systems, the matter in issue is governed by the law of the selected
jurisdiction that has the most significant relationship to the matter in
issue.
