2005 California Commercial Code Sections 11201-11212 CHAPTER 2. ISSUE AND ACCEPTANCE OF PAYMENT ORDER

11201.  "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 canceling
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.
11202.  (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 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.
11203.  (a) If an accepted payment order is not, under subdivision
(a) of Section 11202, an authorized order of a customer identified as
sender, but is effective as an order of the customer pursuant to
subdivision (b) of Section 11202, 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.
   (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.
   (b) This section applies to amendments of payment orders to the
same extent it applies to payment orders.
11204.  (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 11202, or
(ii) not enforceable, in whole or in part, against the customer under
Section 11203, 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 subdivision (a) may be fixed by
agreement as stated in subdivision (1) of Section 1204, but the
obligation of a receiving bank to refund payment as stated in
subdivision (a) may not otherwise be varied by agreement.
11205.  (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 11206 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).
   (2) If the funds transfer is completed on the basis of an
erroneous payment order described in clause (i) or (iii) of this
subdivision, 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.
   (3) If the funds transfer is completed on the basis of a payment
order described in clause (ii) of this subdivision, 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.
   (b) If (i) the sender of an erroneous payment order described in
subdivision (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.
11206.  (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.
11207.  (a) Subject to subdivision (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 subdivision (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.
   (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.
   (c) If (i) a payment order described in subdivision (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 paragraph (1) of subdivision (b), the following rules apply:
   (1) If the originator is a bank, the originator is obliged to pay
its order.
   (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 even 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 of proof if it proves that the originator,
before the payment order was accepted, signed a writing stating the
information to which the notice relates.
   (d) In a case governed by paragraph (1) of subdivision (b), 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 obliged to pay its payment order as
stated in subdivision (c), the originator has the right to recover.
   (2) If the originator is not a bank and is not obliged to pay its
payment order, the originator's bank has the right to recover.
11208.  (a) This subdivision 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.
   (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.
   (b) This subdivision 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.
   (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 paragraph (1) of subdivision (b), 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.
   (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.
   (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 paragraph (1) of subdivision (a) of Section 11302.
11209.  (a) Subject to subdivision (d), a receiving bank other than
the beneficiary's bank accepts a payment order when it executes the
order.
   (b) Subject to subdivisions (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
subdivision (a) or (b) of Section 11405, 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.
   (2) When the bank receives payment of the entire amount of the
sender's order pursuant to paragraph (1) or (2) of subdivision (a) of
Section 11403.
   (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.
   (c) Acceptance of a payment order cannot occur before the order is
received by the receiving bank.  Acceptance does not occur under
paragraph (2) or (3) of subdivision (b) 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 subdivision (b) of Section
11211, the bank may recover from the beneficiary any payment
received to the extent allowed by the law governing mistake and
restitution.
11210.  (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 subdivision 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 subdivision (d) of Section 11211 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.
11211.  (a) A communication of the sender of a payment order
canceling 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 subdivision (a), a communication by the sender
canceling 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.
   (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.
   (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 paragraph (2) of subdivision (c).
11212.  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 division, 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 division or by express agreement.  Liability based on acceptance
arises only when acceptance occurs as stated in Section 11209, and
liability is limited to that provided in this division.  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 division or by express agreement.