Okla. Stat. tit. 12A § 4-103

Current through Laws 2024, c. 378.

Section 4-103 - Variation by Agreement; Measure of Damages; Certain Action Constituting Ordinary Care

(a) The effect of the provisions of this article may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure; however, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.

(b) Federal Reserve regulations and operating circulars, clearing-house rules, and the like have the effect of agreements under subsection (a) of this section, whether or not specifically assented to by all parties interested in items handled.

(c) Action or non-action approved by this article or pursuant to Federal Reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or non-action consistent with clearing-house rules and the like or with a general banking usage not disapproved by this article, is prima facie the exercise of ordinary care.

(d) The specification or approval of certain procedures by this article is not disapproval of other procedures that may be reasonable under the circumstances.

(e) The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.

Okla. Stat. tit. 12A, § 4-103

Laws 1961, p. 121, § 4-103; Amended by Laws 1991, SB 25, c. 117, § 96, eff. 1/1/1992.

Oklahoma Code Comment

1. Under subsection (a), the parties to transactions still have the power to vary the effect of Article 4's provisions by agreement, except as may be restricted by this or other provisions. However, note that Regulation CC of the Federal Reserve Board ( 12 C.F.R. part 229 ) significantly the rights of panics to so contract in transactions Reg. CC covers. For example, the time within which funds must be made available to customers from deposited items may be shortened, but may not be increased. See UCC § 4-215(e) and (f) and 12 C.F.R. § 229.19(c)(l) . The right to extend the midnight deadline (UCC § 4-301) by agreement is also regulated by Reg. CC (see 12 C.F.R. §§229.38(b) , 229.30(a) and (c) ), and the midnight deadline may be extended unilaterally in some circumstances ( 12 C.F.R. § 229.30(c) ). In addition, the time limits for the return of items by the payor bank and any intermediary banks are set by regulation and cannot be varied by agreement. 12 C.F.R. §§ 229.30(b)229.31(a) .

The rule that a bank cannot disclaim responsibility for its own lack of good faith or limit the damages for such lack is unchanged. UCC § 4-103(a). However, the effect of this provision is altered because "good faith" now includes the "observance of reasonable commercial standards of fair dealing." See UCC §§ 3-103(a)(4), 4-104(c).

The ability of banks to, by contract, place on the customer virtually strict liability for forged items when the customer uses a facsimile signature machine (see Perini Corp. v First Nat'l Bank of Habersham County, Georgia, 553 F.2d 398 (5th Cir. 1977)) appears to be unchanged. See UCC § 3-404, Comment 2, Case # 4.

2. Subsection (b) does not change existing law. Action in accordance with Federal Reserve regulations and operating circulars continues to be the exercise of ordinary care, and such documents may alter the effect of Article 4 provisions. See Security Bank & Trust Co. v. Federal Nat'l Bank & Trust Co. of Shawnee, 554 P.2d 119 (Okla Ct. App. 1976). Subsection (b) treats Federal Reserve Board Regulations and operating circulars as agreements even though the panics involved have not assented to their application and even though they may be preemptive. In contrast, Section 3-102 gives effect to federal regulations and operating circulars on' as preemptive, and only to the extent they supersede inconsistent provisions of Article 3. Thus, Article 4, which deals specifically with banking practices, applies such regulations and operating circulars more broadly than does Article 3. This is workable because panics involved in bank collections presumably are familiar with Federal Reserve regulations and operations, banks are subject to those rules each time they deal with items cleared through the Federal Reserve.