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Texas Business & Commerce Code - Section 4A.405. Payment By Beneficiary's Bank To Beneficiary

Legal Research Home > Texas Lawyer > Business & Commerce Code > Texas Business & Commerce Code - Section 4A.405. Payment By Beneficiary's Bank To Beneficiary

§ 4A.405. PAYMENT BY BENEFICIARY'S BANK TO 
BENEFICIARY.  (a) If the beneficiary's bank credits an account of 
the beneficiary of a payment order, payment of the bank's 
obligation under Section 4A.404(a) occurs when and to the extent:
		(1)  the beneficiary is notified of the right to 
withdraw the credit;       
		(2)  the bank lawfully applies the credit to a debt of 
the beneficiary;  or 
		(3)  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 Section 4A.404(a) occurs is governed by 
principles of law that determine when an obligation is satisfied.
	(c)  Except as provided by 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 through the system are 
provisional until receipt of payment by the beneficiary's bank of 
the payment order is 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 Section 4A.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:
		(1)  the acceptance by the beneficiary's bank is 
nullified and no person has any right or obligation based on the 
acceptance;
		(2)  the beneficiary's bank is entitled to recover 
payment from the beneficiary;
		(3)  no payment by the originator to the beneficiary 
occurs under Section 4A.406;  and
		(4)  subject to Section 4A.402(e), each sender in the 
funds transfer is excused from its obligation to pay its payment 
order under Section 4A.402(c) because the funds transfer has not 
been completed.

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

Last modified: August 10, 2007