Okla. Stat. tit. 12A § 4A-505

Current through Laws 2024, c. 378.

Section 4A-505 - Preclusion of Objection to Debit of Customer's Account

(a) If a receiving bank has received payment from its customer with respect to a payment order issued in the name of the customer as sender and accepted by the bank, and the customer received notification reasonably identifying the order, the customer is precluded from asserting that the bank is not entitled to retain the payment unless the customer notifies the bank of the customer's objection to the payment within (1) one year after the notification was received by the customer.

(b) The one-year period provided for in subsection (a) of this section may be reduced by agreement, but not to less than sixty (60) days.

Okla. Stat. tit. 12A, § 4A-505

Added by Laws 1990, SB 641, c. 110, § 36, eff. 7/1/1991; Amended by Laws 2008, SB 1708, c. 382, §19, eff. 11/1/2008 (Laws 2008, SB 1708, c. 382 held unconstitutional and void by Weddington v. Henry, 2008 OK 102, 202 P.3d 143, and repealed by Laws 2009, SB 991, c. 208, §22, eff. 11/1/2009); Amended by Laws 2009, SB 991, c. 208, §19, eff. 11/1/2009.

Oklahoma Code Comment

This section establishes the statute of limitations for all claims by a bank customer under Article 4A, if the claim seeks recovery of the funds used to pay for the payment order. Note that it does not matter whether the action for recovery is based on contract, statute, or tort. The one year limitation applies in all cases. This is similar to the one year statute under 12A O.S. Section 4-406(4) for a claim based on an unauthorized signature. While the title to the section and Official Comment 1 refer to the most common method of payment (by debiting the originator's bank account) the text of the section applies the one year statute irrespective of the method used to pay for the payment order. If this were not the case, the applicable limitations period would vary with the method of payment, a result not intended by the drafters.

The one year period begins to run from the date notice of the payment is received by the bank's customer. Pursuant to 12A O.S. § 1-201(26), "notice" occurs when the bank takes such steps as may be reasonably required to inform the customer in the ordinary course of business. The notice is "received" if it is duly delivered to the customer's place of business. This means that notice is effective even if the payment order was engineered by the customer's agent to misdirect and the same agent intercepts the notice. This language is similar to the rule governing forged signatures on the drawer's check under 12A O.S. 4-406(4), which places on the drawer the duty to control and supervise its accounts. The result may be different from the one obtained under Section 4-406 however. The language of § 4-406(4) is similar to that of 6 O.S. § 118w, which it replaced. The Oklahoma Supreme Court, in First National Bank of McAlester v. Mann, 410 P.2d 74 (Okla.1965), held that the actions of a dishonest employee may toll the limitation period under § 118w. The Mann decision is contrary to an extensive line of decisions construing § 4-406 from other jurisdictions, which do not permit a dishonest employee to toll the limitation period. See F. Miller and A. Harrell, The Law of Modern Payment Systems and Notes 1 9.03(4) (1986). In keeping with the statement of purposes and policies in 12A O.S. Section 1-102(2)(c), an Oklahoma court should look to these alternative jurisdictions, rather than the Mann decision, in interpreting the provisions of § 4-406. However, even if the Mann decision still governs the result under § 4-406, it should not be applied to § 4A-505 . Unlike § 4-406 , § 4A-605 specifically limits the bank's obligation to providing "notice," as defined in § 1-201(26).