400.4-406. Customer's duty to discover and report unauthorized signature or alteration. - Missouri Statutes

Customer's duty to discover and report unauthorized signature oralteration.

400.4-406. (a) A bank that sends or makes available to a customer astatement of account showing payment of items for the account shall eitherreturn or make available to the customer the items paid or provide informationin the statement of account sufficient to allow the customer reasonably toidentify the items paid. The statement of account provides sufficientinformation if the item is described by item number, amount, and date ofpayment.

(b) If the items are not returned to the customer, the person retainingthe items shall either retain the items or, if the items are destroyed,maintain the capacity to furnish legible copies of the items until theexpiration of five years after receipt of the items. A customer may requestan item from the bank that paid the item, and that bank must provide in areasonable time either the item or, if the item has been destroyed or is nototherwise obtainable, a legible copy of the item.

(c) If a bank sends or makes available a statement of account or itemspursuant to subsection (a), the customer must exercise reasonable promptnessin examining the statement or the items to determine whether any payment wasnot authorized because of an alteration of an item or because a purportedsignature by or on behalf of the customer was not authorized. If, based onthe statement or items provided, the customer should reasonably havediscovered the unauthorized payment, the customer must promptly notify thebank of the relevant facts.

(d) If the bank proves that the customer failed, with respect to an itemto comply with the duties imposed on the customer by subsection (c), thecustomer is precluded from asserting against the bank:

(1) 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

(2) the customer's unauthorized signature or alteration by the samewrongdoer on any other item paid in good faith by the bank if the payment wasmade before the bank received notice from the customer of the unauthorizedsignature or alteration and after the customer had been afforded a reasonableperiod of time, not exceeding thirty days, in which to examine the item orstatement of account and notify the bank.

(e) If subsection (d) applies and the customer proves that the bankfailed to exercise ordinary care in paying the item and that the failuresubstantially contributed to loss, the loss is allocated between the customerprecluded and the bank asserting the preclusion according to the extent towhich the failure of the customer to comply with subsection (c) and thefailure of the bank to exercise ordinary care contributed to the loss. If thecustomer proves that the bank did not pay the item in good faith, thepreclusion under subsection (d) does not apply.

(f) Without regard to care or lack of care of either the customer or thebank, a customer who does not within one year after the statement or items aremade available to the customer (subsection (a)) discover and report thecustomer's unauthorized signature on or any alteration on the item isprecluded from asserting against the bank the unauthorized signature oralteration. If there is a preclusion under this subsection, the payor bankmay not recover for breach or warranty under Section 400.4-208 with respect tothe unauthorized signature or alteration to which the preclusion applies.

(L. 1963 p. 503 § 4-406, A.L. 1992 S.B. 448)