(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
| | 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
| | 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 1-302(b), 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. 95-895, eff. 1-1-09.)
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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
| | 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
| | 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
| | 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),
| | 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
| | 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
| | obligated to pay its order.
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(2) If the originator is not a bank and proves that
| | 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 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
| | 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
| | 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 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
| | 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
| | 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
| | 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
| | 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
| | 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
| | 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
| | 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
| | 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
| | 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 than 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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(d) An unaccepted payment order is canceled by operation of law at the
close of the fifth funds transfer business day of the receiving bank after
the execution date or payment date of the order.
(e) A canceled payment order cannot be accepted. If an accepted payment
order is canceled, the acceptance is nullified and no person has any right
or obligation based on the acceptance. Amendment of a payment order is
deemed to be cancellation of the original order at the time of amendment
and issue of a new payment order in the amended form at the same time.
(f) Unless otherwise provided in an agreement of the parties or in a
funds transfer system rule, if the receiving bank, after accepting a
payment order, agrees to cancellation or amendment of the order by the
sender or is bound by a funds transfer system rule allowing cancellation or
amendment without the bank's agreement, the sender, whether or not
cancellation or amendment is effective, is liable to the bank for any loss
and expenses, including reasonable attorney's fees, incurred by the bank as
a result of the cancellation or amendment or attempted cancellation or
amendment.
(g) A payment order is not revoked by the death or legal incapacity of
the sender unless the receiving bank knows of the death or of an
adjudication of incapacity by a court of competent jurisdiction and has
reasonable opportunity to act before acceptance of the order.
(h) A funds transfer system rule is not effective to the extent it
conflicts with subsection (c)(2).
(Source: P.A. 97-813, eff. 7-13-12.)
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(810 ILCS 5/4A-212) (from Ch. 26, par. 4A-212)
Sec. 4A-212.
Liability and duty of receiving bank regarding unaccepted
payment order. If a receiving bank fails to accept a payment order that it
is obliged by express agreement to accept, the bank is liable for breach of
the agreement to the extent provided in the agreement or in this Article,
but does not otherwise have any duty to accept a payment order or, before
acceptance, to take any action, or refrain from taking action, with respect
to the order except as provided in this Article or by express agreement.
Liability based on acceptance arises only when acceptance occurs as stated
in Section 4A-209, and liability is limited to that provided in this
Article. A receiving bank is not the agent of the sender or beneficiary of
the payment order it accepts, or of any other party to the funds transfer,
and the bank owes no duty to any party to the funds transfer except as
provided in this Article or by express agreement.
(Source: P.A. 86-1291.)
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