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Texas Business & Commerce Code - Section 4.406. Customer's Duty To Discover And Report Unauthorized Signature Or Alteration

Legal Research Home > Texas Lawyer > Business & Commerce Code > Texas Business & Commerce Code - Section 4.406. Customer's Duty To Discover And Report Unauthorized Signature Or Alteration

§ 4.406. CUSTOMER'S DUTY TO DISCOVER AND REPORT 
UNAUTHORIZED SIGNATURE OR ALTERATION.  (a) A bank that sends or 
makes available to a customer a statement of account showing 
payment of items for the account shall either return or make 
available to the customer 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.  If the bank does not return 
the items, it shall provide in the statement of account the 
telephone number that the customer may call to request an item or a 
legible copy of the items pursuant to Subsection (b).
	(b)  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 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.  A bank shall 
provide, on request and without charge to the customer, at least two 
items or a legible copy of the items with respect to each statement 
of account sent to the customer.
	(c)  If a bank sends or makes available a statement of 
account or items pursuant to Subsection (a), 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.
	(d)  If the bank proves that the customer failed, with 
respect to an item, to comply with the duties imposed on the 
customer by Subsection (c), the customer 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 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 30 days, in which to examine the item 
or statement of account and notify the bank.
	(e)  If Subsection (d) applies and the customer proves that 
the bank failed to exercise ordinary care in paying the item and 
that the failure 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 (c) 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 (d) does not apply.
	(f)  Without regard to care or lack of care of either the 
customer or the bank, a customer who does not within one year after 
the statement or items are made available to the customer 
(Subsection (a)) 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 Section 
4.208 with respect to the unauthorized signature or alteration to 
which the preclusion applies.

Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.  
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.

Last modified: August 10, 2007