2006 New York Code - Customer\'s Duty To Discover And Report Unauthorized Signature Or Alteration.



 
  Section 4--406. Customer's  Duty  to  Discover  and  Report Unauthorized
                    Signature or Alteration.
    (1) When  a  bank  sends  to  its  customer  a  statement  of  account
  accompanied  by items paid in good faith in support of the debit entries
  or holds the statement and items pursuant to a request  or  instructions
  of  its customer or otherwise in a reasonable manner makes the statement
  and  items  available  to  the  customer,  the  customer  must  exercise
  reasonable  care  and  promptness  to examine the statement and items to
  discover his unauthorized signature or any alteration  on  an  item  and
  must notify the bank promptly after discovery thereof.
    (2)  If  the bank establishes that the customer failed with respect to
  an item to comply with the duties imposed on the customer by  subsection
  (1) the customer is precluded from asserting against the bank
         (a) his  unauthorized  signature or any alteration on the item if
             the bank also establishes that it suffered a loss  by  reason
             of such failure; and
         (b) an unauthorized signature or alteration by the same wrongdoer
             on  any  other  item paid in good faith by the bank after the
             first item and statement was available to the customer for  a
             reasonable  period  not  exceeding fourteen calendar days and
             before the bank receives notification from  the  customer  of
             any such unauthorized signature or alteration.
    (3) The preclusion under subsection (2) does not apply if the customer
  establishes  lack of ordinary care on the part of the bank in paying the
  item(s).
    (4) Without regard to care or lack of care of either the  customer  or
  the  bank  a  customer  who  does  not within one year from the time the
  statement and items are made available to the customer (subsection  (1))
  discover  and report his unauthorized signature or any alteration on the
  face or back of the item or does not within three years from  that  time
  discover  and  report  any  unauthorized  indorsement  is precluded from
  asserting against the bank such unauthorized signature or indorsement or
  such alteration.
    (5) If under this section a payor bank has a valid defense  against  a
  claim of a customer upon or resulting from payment of an item and waives
  or  fails  upon  request  to  assert the defense the bank may not assert
  against  any  collecting  bank  or  other  prior  party  presenting   or
  transferring  the  item a claim based upon the unauthorized signature or
  alteration giving rise to the customer's claim.

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