Okla. Stat. tit. 12A § 4A-305
Okla. Stat. tit. 12A, § 4A-305
Oklahoma Code Comment
The issue of consequential and other damages governed by this section has been one of the most heavily litigated under law prior to Article 4A the discussion of the Evra, Central Coordinates, Cooper, Houston Contracting, Aachen, and Haviland cases in the introductory commentary. Generally, Article 4A denies consequential damages, that is, if a receiving bank breaches its obligation to properly complete an order, it will not be liable for lost profits or similar damages. It may by express written agreement undertake liability for consequential damages. Any agreement by the receiving bank to be liable for consequential damages is a significant increase in its potential liability in the transfer. An agreement of this nature should not be entered into lightly and fees adequate to compensate for the risk should be charged. It may be possible that the risk would be so great or undefinable that no amount of fee would be adequate or determinable. From the senders side, any "express agreement" of this type should set out expressly with specificity the liability assumed by the bank.
Section 4A-305(b) prohibits the recovery of consequential damages by the originator for an improper or failed execution of the payment order unless otherwise agreed to in writing pursuant to Section 4A-305(c) . Allowing consequential damages would be unworkable, because the banks in the transmittal chain have no ability to accurately measure their exposure and set fees accordingly. Moreover, if the fee for each transaction had to be set separately by a bank officer, based on the exposure in that particular situation, it would slow the process down to a crawl. Article 4A takes the view that the person best able to judge the extent of the risk, and so to take steps to protect against it, is the originator. As a substitute for consequential damages, the originator receives a "money-back guaranty" under the provisions of § 4A-305(b), which grants an unqualified right to recover the improperly paid funds from the bank responsible for the error. In this way, it is assured that the transaction will be "unraveled." The burden of the loss will fall on the responsible bank.
The limitation of consequential damages is a departure from current Oklahoma law. As pointed out in Evra Corp. v. Swiss Bank Corp., cited in Official Comment 2 to this section and discussed in the introductory comment, the standard which applies for measuring consequential damages may vary depending on whether the claimant's right of action arises out of contract or tort. However, in Oklahoma there is no practical difference. If there is a contract between the parties, Oklahoma recognizes the application of the principals of Hardly v. Baxendale, discussed in Official Comment 2. As originally announced, the Hadley rule provides that consequential damages will not be awarded unless the defendant was put on notice of the special circumstances giving rise to the damages. However, Oklahoma has adopted the reformulation of the Hadley rule in the Restatement (Second) of Contracts § 351 (1979), which states that foreseeable damages are recoverable in a breach of contract action. See for example, Perry v. Lawson Ford Tractor Co.. 613 P.2d 458, 464 fn.13 (Okla.1980). "Foreseeability" is usually a jury question in Oklahoma. As noted in Evra, this modification of Hadley's consequential damages rule makes the grounds for recovery virtually identical in contract and tort actions. Oklahoma recognizes that an action in tort may arise from breach of either a statutory duty or, under certain limited circumstances, a contractual duty. See Rodgers v. Tecumseh Bank, 756 P.2d 1223 (Okla. 1988). Accordingly, absent the limitations contained in §4A-305(b), recovery of a wide range of consequential damages might be available in any action resulting from a transaction covered by Article 4A, whether based on the contract between the parties or upon the statutory duties established by the Article.
A related question arises in connection with an unauthorized payment order where either (i) the bank failed to comply with its own commercially reasonable security procedure, (a) there was no security procedure in place, or (iii) the originator managed to meet the burden of proof set forth in §4A-203(a)(2). In all these instances, the originator would be entitled to recover the unauthorized payment under § 4A-202, but § 4A-305 would bar the recovery of consequential damages. However, it is conceivable that the originator might, in the interim, have drawn a check against the account which was debited to fund the payment order. If this check were returned for "insufficient funds" as a result of the unauthorized debit, the wrongful dishonor of the check according to the Official Comment to revised UCC § 4-402 would be covered by 12A O.S. § 4-402, which permits recovery by the drawer of all proximately caused damages, including consequential damages, regardless of notice. See the Oklahoma Comment to Section 4A-404 .