§ 25-4-406. Customer's duty to discover and report unauthorized signature or alteration.
§25‑4‑406. Customer's duty to discover and report unauthorizedsignature or alteration.
(a) A bank that sendsor makes available to a customer a statement of account showing payment ofitems for the account shall either return or make available to the customer theitems paid or provide information in the statement of account sufficient toallow the customer reasonably to identify the items paid. The statement ofaccount provides sufficient information if the item is described by itemnumber, amount, and date of payment.
(b) If the items arenot returned to the customer, the person retaining the items shall eitherretain the items or, if the items are destroyed, maintain the capacity tofurnish legible copies of the items until the expiration of seven years afterreceipt of the items. A customer may request an item from the bank that paidthe item, and that bank must provide in a reasonable time either the item or,if the item has been destroyed or is not otherwise obtainable, a legible copyof the item.
(c) If a bank sends ormakes available a statement of account or items pursuant to subsection (a) ofthis section, the customer must exercise reasonable promptness in examining thestatement or the items to determine whether any payment was not authorized becauseof an alteration of an item or because a purported signature by or on behalf ofthe customer was not authorized. If, based on the statement or items provided,the customer should reasonably have discovered the unauthorized payment, thecustomer must promptly notify the bank of the relevant facts.
(d) If the bank provesthat the customer failed, with respect to an item, to comply with the dutiesimposed on the customer by subsection (c) of this section, the customer isprecluded from asserting against the bank:
(1) The customer'sunauthorized signature or any alteration on the item, if the bank also provesthat it suffered a loss by reason of the failure; and
(2) The customer'sunauthorized signature or alteration by the same wrongdoer on any other item paidin good faith by the bank if the payment was made before the bank receivednotice from the customer of the unauthorized signature or alteration and afterthe customer had been afforded a reasonable period of time, not exceeding 30days, in which to examine the item or statement of account and notify the bank.
(e) If subsection (d)of this section applies and the customer proves that the bank failed toexercise ordinary care in paying the item and that the failure substantiallycontributed to loss, the loss is allocated between the customer precluded andthe bank asserting the preclusion according to the extent to which the failureof the customer to comply with subsection (c) of this section and the failureof the bank to exercise ordinary care contributed to the loss. If the customerproves that the bank did not pay the item in good faith, the preclusion undersubsection (d) of this section does not apply.
(f) Without regard tocare or lack of care of either the customer or the bank, a customer who doesnot within one year after the statement or items are made available to thecustomer (subsection (a) of this section) discover and report the customer'sunauthorized signature on or any alteration on the item is precluded fromasserting against the bank the unauthorized signature or alteration. If thereis a preclusion under this subsection, the payor bank may not recover forbreach of warranty under G.S. 25‑4‑208 [25‑4‑207.1]with respect to the unauthorized signature or alteration to which thepreclusion applies. (1965, c. 700, s. 1; 1981, c. 599, s. 19; 1995, c.232, s. 2.)