There is a newer version of the Kentucky Revised Statutes
2009 Kentucky Revised Statutes
Article 4 Bank Deposits and Collections
355.4.406 Customer's duty to discover and report unauthorized signature or alteration.
Download pdfcustomer the items paid or provide information in the statement of account
sufficient to allow the customer reasonably to identify the items paid. The statement
of account provides sufficient information if the item is described by item number,
amount, and date of payment. (2) If the items are not returned to the customer, the person retaining the items shall either retain the items or, if the items are destroyed, maintain the capacity to furnish
legible copies of the items until the expiration of seven (7) years after receipt of the
items. A customer may request an item from the bank that paid the item, and that
bank must provide in a reasonable time either the item or, if the item has been
destroyed or is not otherwise obtainable, a legible copy of the item. (3) If a bank sends or makes available a statement of account or items pursuant to subsection (1) of this section, the customer must exercise reasonable promptness in
examining the statement or the items to determine whether any payment was not
authorized because of an alteration of an item or because a purported signature by or
on behalf of the customer was not authorized. If, based on the statement or items
provided, the customer should reasonably have discovered the unauthorized
payment, the customer must promptly notify the bank of the relevant facts. (4) If the bank proves that the customer failed, with respect to an item, to comply with the duties imposed on the customer by subsection (3) of this section, the customer is
precluded from asserting against the bank:
(a) The customer's unauthorized signature or any alteration on the item, if the bank also proves that it suffered a loss by reason of the failure; and (b) The customer's unauthorized signature or alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before
the bank received notice from the customer of the unauthorized signature or
alteration and after the customer had been afforded a reasonable period of
time, not exceeding thirty (30) days, in which to examine the item or
statement of account and notify the bank. (5) If subsection (4) of this section applies and the customer proves that the bank failed to exercise ordinary care in paying the item and that the failure substantially
contributed to loss, the loss is allocated between the customer precluded and the
bank asserting the preclusion according to the extent to which the failure of the
customer to comply with subsection (3) of this section and the failure of the bank to
exercise ordinary care contributed to the loss. If the customer proves that the bank
did not pay the item in good faith, the preclusion under subsection (4) of this section
does not apply. (6) Without regard to care or lack of care of either the customer or the bank, a customer who does not within one (1) year after the statement or items are made available to
the customer (subsection (1)) discover and report the customer's unauthorized signature on or any alteration on the item is precluded from asserting against the
bank the unauthorized signature or alteration. If there is a preclusion under this
subsection, the payor bank may not recover for breach of warranty under KRS
355.4-208 with respect to the unauthorized signature or alteration to which the
preclusion applies. Effective: January 1, 1997
History: Amended 1996 Ky. Acts ch. 130, sec. 106, effective January 1, 1997. -- Created 1958 Ky. Acts ch. 77, sec. 4-406, effective July 1, 1960.
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