KANSAS OFFICE of
  REVISOR of STATUTES

  

Home >> Statutes >> Back


Click to open printable format in new window.Printable Format
 | Next

84-4a-405. Payment by beneficiary's bank to beneficiary. (a) If the beneficiary's bank credits an account of the beneficiary of a payment order, payment of the bank's obligation under subsection (a) of K.S.A. 84-4a-404 occurs when and to the extent: (i) The beneficiary is notified of the right to withdraw the credit; (ii) the bank lawfully applies the credit to a debt of the beneficiary; or (iii) funds with respect to the order are otherwise made available to the beneficiary by the bank.

(b) If the beneficiary's bank does not credit an account of the beneficiary of a payment order, the time when payment of the bank's obligation under subsection (a) of K.S.A. 84-4a-404 occurs is governed by principles of law that determine when an obligation is satisfied.

(c) Except as stated in subsections (d) and (e), if the beneficiary's bank pays the beneficiary of a payment order under a condition to payment or agreement of the beneficiary giving the bank the right to recover payment from the beneficiary if the bank does not receive payment of the order, the condition to payment or agreement is not enforceable.

(d) A funds-transfer system rule may provide that payments made to beneficiaries of funds transfers made through the system are provisional until receipt of payment by the beneficiary's bank of the payment order it accepted. A beneficiary's bank that makes a payment that is provisional under the rule is entitled to refund from the beneficiary if: (i) The rule requires that both the beneficiary and the originator be given notice of the provisional nature of the payment before the funds transfer is initiated; (ii) the beneficiary, the beneficiary's bank, and the originator's bank agreed to be bound by the rule; and (iii) the beneficiary's bank did not receive payment of the payment order that it accepted. If the beneficiary is obliged to refund payment to the beneficiary's bank, acceptance of the payment order by the beneficiary's bank is nullified and no payment by the originator of the funds transfer to the beneficiary occurs under K.S.A. 84-4a-406.

(e) This subsection applies to a funds transfer that includes a payment order transmitted over a funds-transfer system that: (i) Nets obligations multilaterally among participants; and (ii) has in effect a loss-sharing agreement among participants for the purpose of providing funds necessary to complete settlement of the obligations of one or more participants that do not meet their settlement obligations. If the beneficiary's bank in the funds transfer accepts a payment order and the system fails to complete settlement pursuant to its rules with respect to any payment order in the funds transfer: (i) The acceptance by the beneficiary's bank is nullified and no person has any right or obligation based on the acceptance; (ii) the beneficiary's bank is entitled to recover payment from the beneficiary; (iii) no payment by the originator to the beneficiary occurs under K.S.A. 84-4a-406; and (iv) subject to subsection (e) of K.S.A. 84-4a-402, each sender in the funds transfer is excused from its obligation to pay its payment order under subsection (c) of K.S.A. 84-4a-402 because the funds transfer has not been completed.

History: L. 1990, ch. 367, § 30; L. 1991, ch. 294, § 25; July 1.

KANSAS COMMENT, 1996

This section is identical to the 1995 Official Text.

84-4a-405 defines when and how a beneficiary is paid. Under subsection (a), a beneficiary is paid when its account is credited and the beneficiary is notified of its right of withdrawal. The beneficiary can also be paid in a second way when the bank lawfully applies the credit to a debt of the beneficiary. As with setoff, the bank will be acting at its own risk in determining its right of setoff. The third way the bank can pay the beneficiary is in any other manner, and, under subsection (b), the time and effectiveness of the second and third methods of payment is determined by the law regarding the manner of payment attempted.

Subsections (c), (d) and (e) state as a general rule that the beneficiary's bank cannot condition payment on the bank's receiving payment on the order and two exceptions to that rule. If the bank desires to avoid the risk of nonpayment of the order, it should avoid acceptance of the order under 84-4a-209 until it has been paid on the order. The two exceptions, contained in subsections (d) and (e), are a funds transfer system rule allowing provisional payments and loss sharing agreements. Both are explained in depth in Official Comments 3 and 4.


 | Next

CURRENT SESSION
  A Summary of Special Sessions in Kansas
  Bill Brief for Senate Bill No. 1
  Bill Brief for House Bill No. 2001

LEGISLATIVE COORDINATING COUNCIL
  7/09/2024 Meeting Notice Agenda
  6/03/2024 Meeting Notice Agenda
  LCC Policies

REVISOR OF STATUTES
  Chapter 72 Statute Transfer List
  Kansas School Equity & Enhancement Act
  Gannon v. State
  Information for Special Session 2021
  General Info., Legal Analysis & Research
  2023 Amended & Repealed Statutes
  2022 Amended & Repealed Statutes
  2021 Amended & Repealed Statutes
  2020 Amended & repealed Statutes
  2019 Amended & Repealed Statutes

USEFUL LINKS
Session Laws

OTHER LEGISLATIVE SITES
Kansas Legislature
Administrative Services
Division of Post Audit
Research Department