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84-4a-403. Payment by sender to receiving bank. (a) Payment of the sender's obligation under K.S.A. 84-4a-402 to pay the receiving bank occurs as follows:

(1) If the sender is a bank, payment occurs when the receiving bank receives final settlement of the obligation through a federal reserve bank or through a funds-transfer system.

(2) If the sender is a bank and the sender: (i) Credited an account of the receiving bank with the sender; or (ii) caused an account of the receiving bank in another bank to be credited, payment occurs when the credit is withdrawn or, if not withdrawn, at midnight of the day on which the credit is withdrawable and the receiving bank learns of that fact.

(3) If the receiving bank debits an account of the sender with the receiving bank, payment occurs when the debit is made to the extent the debit is covered by a withdrawable credit balance in the account.

(b) If the sender and receiving bank are members of a funds-transfer system that nets obligations multilaterally among participants, the receiving bank receives final settlement when settlement is complete in accordance with the rules of the system. The obligation of the sender to pay the amount of a payment order transmitted through the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against the sender's obligation the right of the sender to receive payment from the receiving bank of the amount of any other payment order transmitted to the sender by the receiving bank through the funds-transfer system. The aggregate balance of obligations owed by each sender to each receiving bank in the funds-transfer system may be satisfied, to the extent permitted by the rules of the system, by setting off and applying against that balance the aggregate balance of obligations owed to the sender by other members of the system. The aggregate balance is determined after the right of setoff stated in the second sentence of this subsection has been exercised.

(c) If two banks transmit payment orders to each other under an agreement that settlement of the obligations of each bank to the other under K.S.A. 84-4a-402 will be made at the end of the day or other period, the total amount owed with respect to all orders transmitted by one bank shall be set off against the total amount owed with respect to all orders transmitted by the other bank. To the extent of the setoff each bank has made payment to the other.

(d) In a case not covered by subsection (a), the time when payment of the sender's obligation under subsection (b) or subsection (c) of K.S.A. 84-4a-202 occurs is governed by applicable principles of law that determine when an obligation is satisfied.

History: L. 1990, ch. 367, § 28; L. 1991, ch. 294, § 23; July 1.

KANSAS COMMENT, 1996

This section is identical to the 1995 Official Text.

This section defines the types of payments satisfying the obligation of the sender to the receiving bank and when the payment occurs. The section defines three forms of payment in subsection (a) and two more in subsections (c) and (d).

The first form of settlement in paragraph (a)(1), if the sender and the receiver are both banks, is a "final settlement" through the federal reserve or a funds transfer system. "Final settlement" is defined in subsection (b) as when the settlement is complete by the rules of the system, including a series of credits and setoffs among all the members of the system, to achieve an aggregate balance.

Paragraph (a)(2) involves payment by crediting an account of the receiving bank by the sending bank, either at the sending bank or at another bank, and notifying the sending bank of the credit, which will then be paid as withdrawn, or at midnight of the day the account is credited and the receiving bank knows of the right of withdrawal. Paragraph (a)(3) also defines payment as the receiving bank debiting an account of the sender in the receiving bank.

Subsection (c) provides for payment to the extent of setoffs and credits between two banks which have sent payment orders to each other. Subsection (d) covers all other forms of payment not made under subsection (a), deferring the time and effect of payment to other law. Such additional payments might be by check or other means.


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