70A-4-406 - Customer's duty to discover and report unauthorized signature or alteration.
70A-4-406. Customer's duty to discover and report unauthorized signature oralteration.
(1) A bank that sends or makes available to a customer a statement of account showingpayment of items for the account shall either return or make available to the customer the itemspaid or provide information in the statement of account sufficient to allow the customerreasonably to identify the items paid. The statement of account provides sufficient information ifthe item is described by item number, amount, and date of payment.
(2) If the items are not returned to the customer, the person retaining the items shall eitherretain the items or, if the items are destroyed, maintain the capacity to furnish legible copies ofthe items until the expiration of seven years after receipt of the items. A customer may request anitem from the bank that paid the item, and that bank must provide in a reasonable time either theitem, or if the item has been destroyed or is not otherwise obtainable, a legible copy of the item.
(3) If a bank sends or makes available a statement of account or items pursuant toSubsection (1), the customer must exercise reasonable promptness in examining the statement orthe items to determine whether any payment was not authorized because of an alteration of anitem or because a purported signature by or on behalf of the customer was not authorized. If,based on the statement or items provided, the customer should reasonably have discovered theunauthorized payment, the customer must promptly notify the bank of the relevant facts.
(4) If the bank proves that the customer failed with respect to an item, to comply with theduties imposed on the customer by Subsection (3), the customer is precluded from assertingagainst the bank:
(a) the customer's unauthorized signature or any alteration on the item if the bank alsoproves that it suffered a loss by reason of the failure; and
(b) the customer's unauthorized signature or alteration by the same wrongdoer on anyother item paid in good faith by the bank if the payment was made before the bank receivednotice from the customer of the unauthorized signature or alteration and after the customer hadbeen afforded a reasonable period of time, not exceeding 30 days, in which to examine the itemor statement of account and notify the bank.
(5) If Subsection (4) applies and the customer proves that the bank failed to exerciseordinary care in paying the item and that the failure substantially contributed to loss, the loss isallocated between the customer precluded and the bank asserting the preclusion according to theextent to which the failure of the customer to comply with Subsection (3) and the failure of thebank to exercise ordinary care contributed to the loss. If the customer proves that the bank didnot pay the item in good faith, the preclusion under Subsection (4) does not apply.
(6) Without regard to care or lack of care of either the customer or the bank, a customerwho does not within one year after the statement or items are made available to the customer,Subsection (1), discover and report the customer's unauthorized signature or any alteration on theitem is precluded from asserting against the bank the unauthorized signature or alteration. If thereis a preclusion under this subsection, the payor bank may not recover for breach of warrantyunder Section 70A-4-207 with respect to the unauthorized signature or alteration to which thepreclusion applies.
Amended by Chapter 237, 1993 General Session