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Texas Business & Commerce Code - Section 4A.202. Authorized And Verified Payment Orders

Legal Research Home > Texas Laws > Business & Commerce Code > Texas Business & Commerce Code - Section 4A.202. Authorized And Verified Payment Orders

§ 4A.202. AUTHORIZED AND VERIFIED PAYMENT ORDERS.  (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:
		(1)  the security procedure was chosen by the customer 
after the bank offered, and the customer refused, a security 
procedure that was commercially reasonable for the customer;  and
		(2)  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 this chapter 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 Section 
4A.203(a)(1), the rights and obligations arising under this section 
or Section 4A.203 may not be varied by agreement.

Added by Acts 1993, 73rd Leg., ch. 570, § 7, eff. Sept. 1, 1993.           

Last modified: August 11, 2007