8.4-406 - Customer's duty to discover and report unauthorized signature or alteration.
§ 8.4-406. Customer's duty to discover and report unauthorized signature oralteration.
(a) A bank that sends or makes available to a customer a statement of accountshowing payment of items for the account shall either return or makeavailable to the customer the items paid or provide information in thestatement of account sufficient to allow the customer reasonably to identifythe items paid. The statement of account provides sufficient information ifthe item is described by item number, amount, and date of payment.
(b) If the items are not returned to the customer, the person retaining theitems shall either retain the items or, if the items are destroyed, maintainthe capacity to furnish legible copies of the items until the expiration ofseven years after receipt of the items. A customer may request an item fromthe bank that paid the item, and the bank must provide in a reasonable timeeither the item or, if the item has been destroyed or is not otherwiseobtainable, a legible copy of the item.
(c) If a bank sends or makes available a statement of account or itemspursuant to subsection (a), the customer must exercise reasonable promptnessin examining the statement or the items to determine whether any payment wasnot authorized because of an alteration of an item or because a purportedsignature by or on behalf of the customer was not authorized. If, based onthe statement or items provided, the customer should reasonably havediscovered the unauthorized payment, the customer must promptly notify thebank of the relevant facts.
(d) If the bank proves that the customer failed with respect to an item tocomply with the duties imposed on the customer by subsection (c) the customeris precluded from asserting against the bank:
(1) the customer's unauthorized signature or any alteration on the item, ifthe bank also proves that it suffered a loss by reason of the failure; and
(2) the customer's unauthorized signature or alteration by the same wrongdoeron any other item paid in good faith by the bank if the payment was madebefore the bank received notice from the customer of the unauthorizedsignature or alteration and after the customer had been afforded a reasonableperiod of time, not exceeding thirty days, in which to examine the item orstatement of account and notify the bank.
(e) If subsection (d) 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 thefailure of the customer to comply with subsection (c) and the failure of thebank to exercise ordinary care contributed to the loss. If the customerproves that the bank did not pay an item in good faith, the preclusion undersubsection (d) does not apply.
(f) Without regard to care or lack of care of either the customer or thebank, a customer who does not within one year after the statement or itemsare made available to the customer (subsection (a)) discover and report thecustomer's unauthorized signature on or any alteration on the item isprecluded from asserting against the bank the unauthorized signature oralteration. If there is a preclusion under this subsection, the payor bankmay not recover for breach of warranty under § 8.4-207.2 with respect to theunauthorized signature or alteration to which the preclusion applies.
(Code 1950, §§ 6-74, 6-75; 1964, c. 219; 1978, c. 75; 1992, c. 693.)