(a) With respect to settlement by a bank, the medium and time of settlement may be prescribed by Federal Reserve regulations or circulars, clearing-house rules, and the like, or agreement. In the absence of such prescription:
(1) The medium of settlement is cash or credit to an account in a Federal Reserve bank of or specified by the person to receive settlement; and
(2) The time of settlement, is:
(A) With respect to tender of settlement by cash, a cashier's check, or teller's check, when the cash or check is sent or delivered;
(B) With respect to tender of settlement by credit in an account in a Federal Reserve Bank, when the credit is made;
(C) With respect to tender of settlement by a credit or debit to an account in a bank, when the credit or debit is made or, in the case of tender of settlement by authority to charge an account, when the authority is sent or delivered; or
(D) With respect to tender of settlement by a funds transfer, when payment is made pursuant to section 28:4A-406(a) to the person receiving settlement.
(b) If the tender of settlement is not by a medium authorized by subsection (a) of this section or the time of settlement is not fixed by subsection (a) of this section, no settlement occurs until the tender of settlement is accepted by the person receiving settlement.
(c) If settlement for an item is made by cashier's check or teller's check and the person receiving settlement, before its midnight deadline:
(1) Presents or forwards the check for collection, settlement is final when the check is finally paid; or
(2) Fails to present or forward the check for collection, settlement is final at the midnight deadline of the person receiving settlement.
(d) If settlement for an item is made by giving authority to charge the account of the bank giving settlement in the bank receiving settlement, settlement is final when the charge is made by the bank receiving settlement if there are funds available in the account for the amount of the item.
CREDIT(S)
(Dec. 30, 1963, 77 Stat. 701, Pub. L. 88-243, § 1; Mar. 23, 1995, D.C. Law 10-249, § 2(e), 42 DCR 467.)
1. Subsection (a) sets forth the medium of settlement that the person receiving settlement must accept. In nearly all cases the medium of settlement will be determined by agreement or by Federal Reserve regulations and circulars, clearing-house rules, and the like. In the absence of regulations, rules or agreement, the person receiving settlement may demand cash or credit in a Federal Reserve bank. If the person receiving settlement does not have an account in a Federal Reserve bank, it may specify the account of another bank in a Federal Reserve bank. In the unusual case in which there is no agreement on the medium of settlement and the bank making settlement tenders settlement other than cash or Federal Reserve bank credit, no settlement has occurred under subsection (b) unless the person receiving settlement accepts the settlement tendered. For example, if a payor bank, without agreement, tenders a teller's check, the bank receiving the settlement may reject the check and return it to the payor bank or it may accept the check as settlement.
2. In several provisions of Article 4 the time that a settlement occurs is relevant. Subsection (a) sets out a general rule that the time of settlement, like the means of settlement, may be prescribed by agreement. In the absence of agreement, the time of settlement for tender of the common agreed media of settlement is that set out in subsection (a)(2). The time of settlement by cash, cashier's or teller's check or authority to charge an account is the time the cash, check or authority is sent, unless presentment is over the counter in which case settlement occurs upon delivery to the presenter. If there is no agreement on the time of settlement and the tender of settlement is not made by one of the media set out in subsection (a), under subsection (b) the time of settlement is the time the settlement is accepted by the person receiving settlement.
3. Subsections (c) and (d) are special provisions for settlement by remittance drafts and authority to charge an account in the bank receiving settlement. The relationship between final settlement and final payment under Section 4-215 is addressed in subsection (b) of Section 4-215. With respect to settlement by cashier's checks or teller's checks, other than in response to over-the-counter presentment, the bank receiving settlement can keep the risk that the check will not be paid on the bank tendering the check in settlement by acting to initiate collection of the check within the midnight deadline of the bank receiving settlement. If the bank fails to initiate settlement before its midnight deadline, final settlement occurs at the midnight deadline, and the bank receiving settlement assumes the risk that the check will not be paid. If there is no agreement that permits the bank tendering settlement to tender a cashier's or teller's check, subsection (b) allows the bank receiving the check to reject it, and, if it does, no settlement occurs. However, if the bank accepts the check, settlement occurs and the time of final settlement is governed by subsection (c).
With respect to settlement by tender of authority to charge the account of the bank making settlement in the bank receiving settlement, subsection (d) provides that final settlement does not take place until the account charged has available funds to cover the amount of the item. If there is no agreement that permits the bank tendering settlement to tender an authority to charge an account as settlement, subsection (b) allows the bank receiving the tender to reject it. However, if the bank accepts the authority, settlement occurs and the time of final settlement is governed by subsection (d).
Reason for 1990 Change [D.C. Law 10-249]
New section. See the Official Comment. Former Section 4-211 applied only to settlements by remittance instruments and authorities to charge which could be received in settlement by a collecting bank without the collecting bank's being responsible if the remittance wasn't paid. The new section is much broader in stating general rules for all types of settlements with respect to the time settlement is made and the medium which the person receiving settlement must accept. Subsections (c) and (d) apply to the issues treated in former Section 4-211.
HISTORICAL AND STATUTORY NOTES
Prior Codifications
1981 Ed., § 28:4-213.
1973 Ed., § 28:4-211.
Legislative History of Laws
For legislative history of D.C. Law 10-249, see Historical and Statutory Notes following § 28:4-101.