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84-4a-402. Obligation of sender to pay receiving bank. (a) This section is subject to K.S.A. 84-4a-205 and 84-4a-207.

(b) With respect to a payment order issued to the beneficiary's bank, acceptance of the order by the bank obliges the sender to pay the bank the amount of the order, but payment is not due until the payment date of the order.

(c) This subsection is subject to subsection (e) and to K.S.A. 84-4a-303. With respect to a payment order issued to a receiving bank other than the beneficiary's bank, acceptance of the order by the receiving bank obliges the sender to pay the bank the amount of the sender's order. Payment by the sender is not due until the execution date of the sender's order. The obligation of that sender to pay its payment order is excused if the funds transfer is not completed by acceptance by the beneficiary's bank of a payment order instructing payment to the beneficiary of the sender's order.

(d) If the sender of a payment order pays the order and was not obliged to pay all or part of the amount paid, the bank receiving payment is obliged to refund payment to the extent the sender was not obliged to pay. Except as provided in K.S.A. 84-4a-204 and K.S.A. 84-4a-304, interest is payable on the refundable amount from the date of payment.

(e) If a funds transfer is not completed as stated in subsection (c) and an intermediary bank is obliged to refund payment as stated in subsection (d), but is unable to do so because not permitted by applicable law or because the bank suspends payments, a sender in the funds transfer that executed a payment order in compliance with an instruction, as stated in subsection (a)(1) of K.S.A. 84-4a-302, to route the funds transfer through that intermediary bank is entitled to receive or retain payment from the sender of the payment order that it accepted. The first sender in the funds transfer that issued an instruction requiring routing through that intermediary bank is subrogated to the right of the bank that paid the intermediary bank to refund as stated in subsection (d).

(f) The right of the sender of a payment order to be excused from the obligation to pay the order as stated in subsection (c) or to receive refund under subsection (d) may not be varied by agreement.

History: L. 1990, ch. 367, § 27; L. 1991, ch. 294, § 22; July 1.

KANSAS COMMENT, 1996

This section is identical to the 1995 Official Text.

This section is subordinate to 84-4a-205, dealing with erroneous payment orders, and 84-4a-207, dealing with misdescription of the beneficiary, either of which may negate the sender's obligation to pay the receiving bank.

Subsection (b) states the normal rule that the acceptance of the payment order by the beneficiary obligates the sender to pay the beneficiary bank. Acceptance is defined in 84-4a-209(b) as paying the beneficiary, notifying the beneficiary of the credit, or receiving the funds without a timely rejection of the order, but the obligation to pay will not accrue prior to the stated payment date of the order. The obligation of the beneficiary's bank to the beneficiary is addressed in 84-4a-404 and 84-4a-405.

Subsection (c) provides that the sender normally is obligated to pay the receiving bank when the receiving bank accepts the sender's payment order. The sender's obligation does not arise until the execution date (84-4a-301(b)), the date the order should be executed by the receiving bank, or the date the order is received if it is after the execution date. This obligation is excused, with the exception of subsection (e), if the funds transfer is not completed by the beneficiary's bank acceptance. Under the provisions of 84-4a-402(e), if the sender has specified an intermediary, and the funds transfer is not completed, and the intermediary is obligated to return the funds but cannot return the funds to its sender because prohibited by law or a suspension of payments, the sender who specified routing through the intermediary which failed is obligated to pay the routing bank and is subrogated to the routing bank's claim against the failed intermediary.

Subsection (d) deals with senders who have mistakenly overpaid the receiving bank, normally through mistake. Such senders are entitled to a refund from the receiving bank, normally with interest. This is often referred to as "the money back guarantee." The sender is entitled to interest unless it has not used reasonable care in notifying the receiving bank of the error as provided in 84-4a-204 and 84-4a-304.

Subsection (f) provides that the rights to be excused from payment in subsection (c), or to a refund in subsection (d), cannot be varied.


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