CHAPTER 4.1. FUND TRANSFERS - Indiana Statutes

IC 26-1-4.1
     Chapter 4.1. Fund Transfers

IC 26-1-4.1-101
Short title
     Sec. 101. IC 26-1-4.1 may be cited as the Uniform Commercial Code-Funds Transfers.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-102
Subject matter
     Sec. 102. Except as otherwise provided in IC 26-1-4.1-108, this chapter applies to funds transfers defined in IC 26-1-4.1-104.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-103
Payment order_definitions
     Sec. 103. (a) In IC 26-1-4.1:
        (1) "Payment order" means an instruction of a sender to a receiving bank, transmitted orally, electronically, or in writing, to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary if:
            (i) the instruction does not state a condition to payment to the beneficiary other than time of payment;
            (ii) the receiving bank is to be reimbursed by debiting an account of, or otherwise receiving payment from, the sender; and
            (iii) the instruction is transmitted by the sender directly to the receiving bank or to an agent, funds-transfer system, or communication system for transmittal to the receiving bank.
        (2) "Beneficiary" means the person to be paid by the beneficiary's bank.
        (3) "Beneficiary's bank" means the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.
        (4) "Receiving bank" means the bank to which the sender's instruction is addressed.
        (5) "Sender" means the person giving the instruction to the receiving bank.
    (b) If an instruction complying with subsection (a)(1) is to make more than one (1) payment to a beneficiary, the instruction is a separate payment order with respect to each payment.
    (c) A payment order is issued when it is sent to the receiving

bank.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-104
Funds transfer_definitions
     Sec. 104. In IC 26-1-4.1:
    (a) "Funds transfer" means the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order.
    (b) "Intermediary bank" means a receiving bank other than the originator's bank or the beneficiary's bank.
    (c) "Originator" means the sender of the first payment order in a funds transfer.
    (d) "Originator's bank" means (i) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or (ii) the originator if the originator is a bank.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-105
Other definitions
     Sec. 105. (a) In IC 26-1-4.1:
        (1) "Authorized account" means a deposit account of a customer in a bank designated by the customer as a source of payment of payment orders issued by the customer to the bank. If a customer does not so designate an account, any account of the customer is an authorized account if payment of a payment order from that account is not inconsistent with a restriction on the use of that account.
        (2) "Bank" means a person engaged in the business of banking and includes a savings bank, savings association, credit union, and trust company. A branch or separate office of a bank is a separate bank for purposes of IC 26-1-4.1.
        (3) "Customer" means a person, including a bank, having an account with a bank or from whom a bank has agreed to receive payment orders.
        (4) "Funds-transfer business day" of a receiving bank means the part of a day during which the receiving bank is open for the receipt, processing, and transmittal of payment orders and cancellations and amendments of payment orders.
        (5) "Funds-transfer system" means a wire transfer network,

automated clearing house, or other communication system of a clearing house or other association of banks through which a payment order by a bank may be transmitted to the bank to which the order is addressed.
        (6) "Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing.
        (7) "Prove" with respect to a fact means to meet the burden of establishing the fact (IC 26-1-1-201(8)).
    (b) Other definitions applying to IC 26-1-4.1 and the sections in which they appear are:
    "Acceptance". IC 26-1-4.1-209.
    "Beneficiary". IC 26-1-4.1-103.
    "Beneficiary's bank". IC 26-1-4.1-103.
    "Executed". IC 26-1-4.1-301.
    "Execution date". IC 26-1-4.1-301.
    "Funds transfer". IC 26-1-4.1-104.
    "Funds-transfer system rule". IC 26-1-4.1-501.
    "Intermediary bank". IC 26-1-4.1-104.
    "Originator". IC 26-1-4.1-104.
    "Originator's bank". IC 26-1-4.1-104.
    "Payment by beneficiary's bank to beneficiary". IC 26-1-4.1-405.
    "Payment by originator to beneficiary". IC 26-1-4.1-406.
    "Payment by sender to receiving bank". IC 26-1-4.1-403.
    "Payment date". IC 26-1-4.1-401.
    "Payment order". IC 26-1-4.1-103.
    "Receiving bank". IC 26-1-4.1-103.
    "Security procedure". IC 26-1-4.1-201.
    "Sender". IC 26-1-4.1-103.
    (c) The following definitions in IC 26-1-4 apply to this IC 26-1-4.1:
    "Clearing house". IC 26-1-4-104.
    "Item". IC 26-1-4-104.
    "Suspends payments". IC 26-1-4-104.
    (d) In addition IC 26-1-1 contains general definitions and principles of construction and interpretation applicable throughout IC 26-1-4.1.
As added by P.L.189-1991, SEC.4. Amended by P.L.79-1998, SEC.29.

IC 26-1-4.1-106
Time payment order is received
     Sec. 106. (a) The time of receipt of a payment order or communication canceling or amending a payment order is determined by the rules applicable to receipt of a notice stated in IC 26-1-1-201(27). A receiving bank may fix a cut-off time or times

on a funds-transfer business day for the receipt and processing of payment orders and communications canceling or amending payment orders. Different cut-off times may apply to payment orders, cancellations, or amendments, or to different categories of payment orders, cancellations, or amendments. A cut-off time may apply to senders generally or different cut-off times may apply to different senders or categories of payment orders. If a payment order or communication canceling or amending a payment order is received after the close of a funds-transfer business day or after the appropriate cut-off time on a funds-transfer business day, the receiving bank may treat the payment order or communication as received at the opening of the next funds-transfer business day.
    (b) If IC 26-1-4.1 refers to an execution date or payment date or states a day on which a receiving bank is required to take action, and the date or day does not fall on a funds-transfer business day, the next day that is a funds-transfer business day is treated as the date or day stated, unless the contrary is stated in IC 26-1-4.1.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-107
Federal reserve regulations and operating circulars
     Sec. 107. Regulations of the Board of Governors of the Federal Reserve System and operating circulars of the Federal Reserve Banks supersede any inconsistent provision of IC 26-1-4.1 to the extent of the inconsistency.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-108
Exclusion of consumer transactions governed by federal law
     Sec. 108. IC 26-1-4.1 does not apply to a funds transfer any part of which is governed by the Electronic Fund Transfer Act of 1978 (Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. 1693 et seq.) as amended from time to time.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-201
"Security procedure"
     Sec. 201. "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.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-202
Authorized and verified payment orders
     Sec. 202. (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 IC 26-1-4.1 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 IC 26-1-4.1-203(a)(1), rights and obligations arising under this section or IC 26-1-4.1-203 may not be varied by agreement.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-203
Unenforceability of certain verified payment orders
     Sec. 203. (a) If an accepted payment order is not, under IC 26-1-4.1-202(a), an authorized order of a customer identified as sender, but is effective as an order of the customer pursuant to IC 26-1-4.1-202(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.
        (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.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-204
Refund of payment and duty of customer to report with respect to unauthorized payment order
     Sec. 204. (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 IC 26-1-2.1-202, or (ii) not enforceable, in whole or in part, against the customer under IC 26-1-4.1-203, 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 ninety (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 IC 26-1-1-204(1), but the obligation of a receiving bank to refund payment as stated in subsection (a) may not otherwise be varied by agreement.
As added by P.L.189-1991, SEC.4. Amended by P.L.1-1992, SEC.138.

IC 26-1-4.1-205
Erroneous payment orders
     Sec. 205. (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 IC 26-1-4.1-206 complied with the security procedure and that the error would have been detected if the receiving bank had also complied, the sender is not obligated to pay the order to the extent stated in subdivisions (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 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.
        (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 obligated 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 subsection (a) is not obligated 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 ninety (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.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-206
Transmission of payment order through funds-transfer or other communication system
     Sec. 206. (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.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-207
Misdescription of beneficiary
     Sec. 207. (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.
        (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 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 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 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 obliged to pay its payment order as stated in subsection (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.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-208
Misdescription of intermediary bank or beneficiary's bank
     Sec. 208. (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.
        (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 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.
        (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 subdivision (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.
        (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 IC 26-1-4.1-302(a)(1). As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-209
Acceptance of payment order
     Sec. 209. (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 IC 26-1-4.1-405(a) or IC 26-1-4.1-405(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;
        (2) when the bank receives payment of the entire amount of the sender's order pursuant to IC 26-1-4.1-403(a)(1) or IC 26-1-4.1-403(a)(2); or
        (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 (1) hour after that time; or
            (ii) one (1) 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 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 IC 26-1-4.1-211(b), the bank may recover from the beneficiary any payment received to the extent allowed by the law governing mistake and restitution.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-210
Rejection of payment order
     Sec. 210. (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 IC 26-1-4.1-211(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.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-211
Cancellation and amendment of payment order
     Sec. 211. (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 subsection (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 subsection (c)(2).
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-212
Liability and duty of receiving bank regarding unaccepted payment order
     Sec. 212. 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 IC 26-1-4.1, 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 IC 26-1-4.1 or by express agreement. Liability based on acceptance arises only when acceptance occurs as stated in IC 26-1-4.1-209, and liability is limited to that provided in IC 26-1-4.1. 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 IC 26-1-4.1 or by express agreement.
As added by P.L.189-1991, SEC.4. Amended by P.L.1-1992, SEC.139.
IC 26-1-4.1-301
Execution and execution date
     Sec. 301. (a) A payment order is "executed" by the receiving bank when it issues a payment order intended to carry out the payment order received by the bank. A payment order received by the beneficiary's bank can be accepted but cannot be executed.
    (b) "Execution date" of a payment order means the day on which the receiving bank may properly issue a payment order in execution of the sender's order. The execution date may be determined by instruction of the sender but cannot be earlier than the day the order is received and, unless otherwise determined, is the day the order is received. If the sender's instruction states a payment date, the execution date is the payment date or an earlier date on which execution is reasonably necessary to allow payment to the beneficiary on the payment date.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-302
Obligations of receiving bank in execution of payment order
     Sec. 302. (a) Except as provided in subsections (b) through (d), if the receiving bank accepts a payment order pursuant to IC 26-1-4.1-209(a), the bank has the following obligations in executing the order:
        (1) The receiving bank is obliged to issue, on the execution date, a payment order complying with the sender's order and to follow the sender's instructions concerning:
            (i) any intermediary bank or funds-transfer system to be used in carrying out the funds transfer; or
            (ii) the means by which payment orders are to be transmitted in the funds transfer.
        If the originator's bank issues a payment order to an intermediary bank, the originator's bank is obliged to instruct the intermediary bank according to the instruction of the originator. An intermediary bank in the funds transfer is similarly bound by an instruction given to it by the sender of the payment order it accepts.
        (2) If the sender's instruction states that the funds transfer is to be carried out telephonically or by wire transfer or otherwise indicates that the funds transfer is to be carried out by the most expeditious means, the receiving bank is obliged to transmit its payment order by the most expeditious available means, and to instruct any intermediary bank accordingly. If a sender's instruction states a payment date, the receiving bank is obliged to transmit its payment order at a time and by means reasonably necessary to allow payment to the beneficiary on the payment

date or as soon thereafter as is feasible.
    (b) Unless otherwise instructed, a receiving bank executing a payment order may (i) use any funds-transfer system if use of that system is reasonable in the circumstances, and (ii) issue a payment order to the beneficiary's bank or to an intermediary bank through which a payment order conforming to the sender's order can expeditiously be issued to the beneficiary's bank if the receiving bank exercises ordinary care in the selection of the intermediary bank. A receiving bank is not required to follow an instruction of the sender designating a funds-transfer system to be used in carrying out the funds transfer if the receiving bank, in good faith, determines that it is not feasible to follow the instruction or that following the instruction would unduly delay completion of the funds transfer.
    (c) Unless subsection (a)(2) applies or the receiving bank is otherwise instructed, the bank may execute a payment order by transmitting its payment order by first class mail or by any means reasonable in the circumstances. If the receiving bank is instructed to execute the sender's order by transmitting its payment order by a particular means, the receiving bank may issue its payment order by the means stated or by any means as expeditious as the means stated.
    (d) Unless instructed by the sender, (i) the receiving bank may not obtain payment of its charges for services and expenses in connection with the execution of the sender's order by issuing a payment order in an amount equal to the amount of the sender's order less the amount of the charges, and (ii) may not instruct a subsequent receiving bank to obtain payment of its charges in the same manner.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-303
Erroneous execution of payment order
     Sec. 303. (a) A receiving bank that (i) executes the payment order of the sender by issuing a payment order in an amount greater than the amount of the sender's order, or (ii) issues a payment order in execution of the sender's order and then issues a duplicate order, is entitled to payment of the amount of the sender's order under IC 26-1-4.1-402(c) if that subsection is otherwise satisfied. The bank is entitled to recover from the beneficiary of the erroneous order the excess payment received to the extent allowed by the law governing mistake and restitution.
    (b) A receiving bank that executes the payment order of the sender by issuing a payment order in an amount less than the amount of the sender's order is entitled to payment of the amount of the sender's order under IC 26-1-4.1-402(c) if (i) that subsection is otherwise satisfied and (ii) the bank corrects its mistake by issuing an additional payment order for the benefit of the beneficiary of the

sender's order. If the error is not corrected, the issuer of the erroneous order is entitled to receive or retain payment from the sender of the order it accepted only to the extent of the amount of the erroneous order. This subsection does not apply if the receiving bank executes the sender's payment order by issuing a payment order in an amount less than the amount of the sender's order for the purpose of obtaining payment of its charges for services and expenses pursuant to instruction of the sender.
    (c) If a receiving bank executes the payment order of the sender by issuing a payment order to a beneficiary different from the beneficiary of the sender's order and the funds transfer is completed on the basis of that error, the sender of the payment order that was erroneously executed and all previous senders in the funds transfer are not obliged to pay the payment orders they issued. The issuer of the erroneous order is entitled to recover from the beneficiary of the order the payment received to the extent allowed by the law governing mistake and restitution.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-304
Duty of sender to report erroneously executed payment order
     Sec. 304. If the sender of a payment order that is erroneously executed as stated in IC 26-1-4.1-303 receives notification from the receiving bank that the order was executed or that the sender's account was debited with respect to the order, the sender has a duty to exercise ordinary care to determine, on the basis of information available to the sender, that the order was erroneously executed and to notify the bank of the relevant facts within a reasonable time not exceeding ninety (90) days after the notification from the bank was received by the sender. If the sender fails to perform that duty, the bank is not obliged to pay interest on any amount refundable to the sender under IC 26-1-4.1-402(d) for the period before the bank learns of the execution error. The bank is not entitled to any recovery from the sender on account of a failure by the sender to perform the duty stated in this section.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-305
Liability for late or improper execution or failure to execute payment order
     Sec. 305. (a) If a funds transfer is completed but execution of a payment order by the receiving bank in breach of IC 26-1-4.1-302 results in delay in payment to the beneficiary, the bank is obliged to pay interest to either the originator or the beneficiary of the funds

transfer for the period of delay caused by the improper execution. Except as provided in subsection (c), additional damages are not recoverable.
    (b) If execution of a payment order by a receiving bank in breach of IC 26-1-4.1-302 results in (i) noncompletion of the funds transfer, (ii) failure to use an intermediary bank designated by the originator, or (iii) issuance of a payment order that does not comply with the terms of the payment order of the originator, the bank is liable to the originator for its expenses in the funds transfer and for incidental expenses and interest losses, to the extent not covered by subsection (a), resulting from the improper execution. Except as provided in subsection (c), additional damages are not recoverable.
    (c) In addition to the amounts payable under subsections (a) and (b), damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank.
    (d) If a receiving bank fails to execute a payment order it was obliged by express agreement to execute, the receiving bank is liable to the sender for its expenses in the transaction and for incidental expenses and interest losses resulting from the failure to execute. Additional damages, including consequential damages, are recoverable to the extent provided in an express written agreement of the receiving bank, but are not otherwise recoverable.
    (e) Reasonable attorney's fees are recoverable if demand for compensation under subsection (a) or (b) is made and refused before an action is brought on the claim. If a claim is made for breach of an agreement under subsection (d) and the agreement does not provide for damages, reasonable attorney's fees are recoverable if demand for compensation under subsection (d) is made and refused before an action is brought on the claim.
    (f) Except as stated in this section, the liability of a receiving bank under subsections (a) and (b) may not be varied by agreement.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-401
"Payment date"
     Sec. 401. "Payment date" of a payment order means the day on which the amount of the order is payable to the beneficiary by the beneficiary's bank. The payment date may be determined by instruction of the sender but cannot be earlier than the day the order is received by the beneficiary's bank and, unless otherwise determined, is the day the order is received by the beneficiary's bank.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-402 Obligation of sender to pay receiving bank
     Sec. 402. (a) This section is subject to IC 26-1-4.1-205 and IC 26-1-4.1-207.
    (b) With respect to a payment order issued to the beneficiary's bank, acceptance of the order by the bank obliges the sender to pay the bank the amount of the order, but payment is not due until the payment date of the order.
    (c) This subsection is subject to subsection (e) and to IC 26-1-4.1-303. With respect to a payment order issued to a receiving bank other than the beneficiary's bank, acceptance of the order by the receiving bank obliges the sender to pay the bank the amount of the sender's order. Payment by the sender is not due until the execution date of the sender's order. The obligation of that sender to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary's bank of a payment order instructing payment to the beneficiary of that sender's payment order.
    (d) If the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged to pay. Except as provided in IC 26-1-4.1-204 and IC 26-1-4.1-304, interest is payable on the refundable amount from the date of payment.
    (e) If a funds transfer is not completed as stated in subsection (c) and an intermediary bank is obliged to refund payment as stated in subsection (d) but is unable to do so because not permitted by applicable law or because the bank suspends payments, a sender in the funds transfer that executed a payment order in compliance with an instruction, as stated in IC 26-1-4.1-302(a)(1), to route the funds transfer through that intermediary bank is entitled to receive or retain payment from the sender of the payment order that it accepted. The first sender in the funds transfer that issued an instruction requiring routing through that intermediary bank is subrogated to the right of the bank that paid the intermediary bank to refund as stated in subsection (d).
    (f) The right of the sender of a payment order to be excused from the obligation to pay the order as stated in subsection (c) or to receive refund under subsection (d) may not be varied by agreement.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-403
Payment by sender to receiving bank
     Sec. 403. (a) Payment of the sender's obligation under IC 26-1-4.1-402 to pay the receiving bank occurs as follows:
        (1) If the sender is a bank, payment occurs when the receiving

bank receives final settlement of the obligation through a Federal Reserve Bank or through a funds-transfer system.
        (2) If the sender is a bank and the sender:
            (i) credited an account of the receiving bank with the sender; or
            (ii) caused an account of the receiving bank in another bank to be credited;
        payment occurs when the credit is withdrawn or, if not withdrawn, at midnight of the day on which the credit is withdrawable and the receiving bank learns of that fact.
        (3) If the receiving bank debits an account of the sender with the receiving bank, payment occurs when the debit is made to the extent the debit is covered by a withdrawable credit balance in the account.
    (b) If the sender and receiving bank are members of a funds-transfer system that nets obligations multilaterally among participants, the receiving bank receives final settlement when settlement is complete in accordance with the rules of the system. The obligation of the sender to pay the amount of a payment order transmitted through the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against the sender's obligation the right of the sender to receive payment from the receiving bank of the amount of any other payment order transmitted to the sender by the receiving bank through the funds-transfer system. The aggregate balance of obligations owed by each sender to each receiving bank in the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against that balance the aggregate balance of obligations owed to the sender by other members of the system. The aggregate balance is determined after the right of setoff stated in the second sentence of this subsection has been exercised.
    (c) If two banks transmit payment orders to each other under an agreement that settlement of the obligations of each bank to the other under IC 26-1-4.1-402 will be made at the end of the day or other period, the total amount owed with respect to all orders transmitted by one bank shall be set off against the total amount owed with respect to all orders transmitted by the other bank. To the extent of the setoff, each bank has made payment to the other.
    (d) In a case not covered by subsection (a), the time when payment of the sender's obligation under IC 26-1-4.1-402(b) or IC 26-1-4.1-402(c) occurs is governed by applicable principles of law

that determine when an obligation is satisfied.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-404
Obligation of beneficiary's bank to pay and give notice to beneficiary
     Sec. 404. (a) Subject to IC 26-1-4.1-211(e), IC 26-1-4.1-405(d), and IC 26-1-4.1-405(e), if a beneficiary's bank accepts a payment order, the bank is obliged to pay the amount of the order to the beneficiary of the order. Payment is due on the payment date of the order, but if acceptance occurs on the payment date after the close of the funds-transfer business day of the bank, payment is due on the next funds-transfer business day. If the bank refuses to pay after demand by the beneficiary and receipt of notice of particular circumstances that will give rise to consequential damages as a result of nonpayment, the beneficiary may recover damages resulting from the refusal to pay to the extent the bank had notice of the damages, unless the bank proves that it did not pay because of a reasonable doubt concerning the right of the beneficiary to payment.
    (b) If a payment order accepted by the beneficiary's bank instructs payment to an account of the beneficiary, the bank is obliged to notify the beneficiary of receipt of the order before midnight of the next funds-transfer business day following the payment date. If the payment order does not instruct payment to an account of the beneficiary, the bank is required to notify the beneficiary only if notice is required by the order. Notice may be given by first class mail or any other means reasonable in the circumstances. If the bank fails to give the required notice, the bank is obliged to pay interest to the beneficiary on the amount of the payment order from the day notice should have been given until the day the beneficiary learned of receipt of the payment order by the bank. No other damages are recoverable. Reasonable attorney's fees are also recoverable if demand for interest is made and refused before an action is brought on the claim.
    (c) The right of a beneficiary to receive payment and damages as stated in subsection (a) may not be varied by agreement or a funds-transfer system rule. The right of a beneficiary to be notified as stated in subsection (b) may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is notified of the rule before initiation of the funds transfer.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-405
Payment by beneficiary's bank to beneficiary
     Sec. 405. (a) If the beneficiary's bank credits an account of the

beneficiary of a payment order, payment of the bank's obligation under IC 26-1-4.1-404(a) occurs when and to the extent (i) the beneficiary is notified of the right to withdraw the credit, (ii) the bank lawfully applies the credit to a debt of the beneficiary, or (iii) funds with respect to the order are otherwise made available to the beneficiary by the bank.
    (b) If the beneficiary's bank does not credit an account of the beneficiary of a payment order, the time when payment of the bank's obligation under IC 26-1-4.1-404(a) occurs is governed by principles of law that determine when an obligation is satisfied.
    (c) Except as stated in subsections (d) and (e), if the beneficiary's bank pays the beneficiary of a payment order under a condition to payment or agreement of the beneficiary giving the bank the right to recover payment from the beneficiary if the bank does not receive payment of the order, the condition to payment or agreement is not enforceable.
    (d) A funds-transfer system rule may provide that payments made to beneficiaries of funds transfers made through the system are provisional until receipt of payment by the beneficiary's bank of the payment order it accepted. A beneficiary's bank that makes a payment that is provisional under the rule is entitled to refund from the beneficiary if (i) the rule requires that both the beneficiary and the originator be given notice of the provisional nature of the payment before the funds transfer is initiated, (ii) the beneficiary, the beneficiary's bank and the originator's bank agreed to be bound by the rule, and (iii) the beneficiary's bank did not receive payment of the payment order that it accepted. If the beneficiary is obliged to refund payment to the beneficiary's bank, acceptance of the payment order by the beneficiary's bank is nullified and no payment by the originator of the funds transfer to the beneficiary occurs under IC 26-1-4.1-406.
    (e) This subsection applies to a funds transfer that includes a payment order transmitted over a funds-transfer system that (i) nets obligations multilaterally among participants, and (ii) has in effect a loss-sharing agreement among participants for the purpose of providing funds necessary to complete settlement of the obligations of one or more participants that do not meet their settlement obligations. If the beneficiary's bank in the funds transfer accepts a payment order and the system fails to complete settlement pursuant to its rules with respect to any payment order in the funds transfer, (i) the acceptance by the beneficiary's bank is nullified and no person has any right or obligation based on the acceptance, (ii) the beneficiary's bank is entitled to recover payment from the beneficiary, (iii) no payment by the originator to the beneficiary occurs under IC 26-1-4.1-406, and (iv) subject to IC 26-1-4.1-402(e),

each sender in the funds transfer is excused from its obligation to pay its payment order under IC 26-1-4.1-402(c) because the funds transfer has not been completed.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-406
Payment by originator to beneficiary; discharge of underlying obligation
     Sec. 406. (a) Subject to IC 26-1-4.1-211(e), IC 26-1-4.1-405(d), and IC 26-1-4.1-405(e), the originator of a funds transfer pays the beneficiary of the originator's payment order (i) at the time a payment order for the benefit of the beneficiary is accepted by the beneficiary's bank in the funds transfer and (ii) in an amount equal to the amount of the order accepted by the beneficiary's bank, but not more than the amount of the originator's order.
    (b) If payment under subsection (a) is made to satisfy an obligation, the obligation is discharged to the same extent discharge would result from payment to the beneficiary of the same amount in money, unless (i) the payment under subsection (a) was made by a means prohibited by the contract of the beneficiary with respect to the obligation, (ii) the beneficiary, within a reasonable time after receiving notice of receipt of the order by the beneficiary's bank, notified the originator of the beneficiary's refusal of the payment, (iii) funds with respect to the order were not withdrawn by the beneficiary or applied to a debt of the beneficiary, and (iv) the beneficiary would suffer a loss that could reasonably have been avoided if payment had been made by a means complying with the contract. If payment by the originator does not result in discharge under this section, the originator is subrogated to the rights of the beneficiary to receive payment from the beneficiary's bank under IC 26-1-4.1-404(a).
    (c) For the purpose of determining whether discharge of an obligation occurs under subsection (b), if the beneficiary's bank accepts a payment order in an amount equal to the amount of the originator's payment order less charges of one or more receiving banks in the funds transfer, payment to the beneficiary is deemed to be in the amount of the originator's order unless upon demand by the beneficiary the originator does not pay the beneficiary the amount of the deducted charges.
    (d) Rights of the originator or of the beneficiary of a funds transfer under this section may be varied only by agreement of the originator and the beneficiary.
As added by P.L.189-1991, SEC.4.

IC 26-1-4.1-501 Variat