Printable Format84-4a-404. Obligation of beneficiary's bank to pay and give notice to beneficiary. (a) Subject to subsection (e) of K.S.A. 84-4a-211 and subsections (d) and (e) of K.S.A. 84-4a-405, if a beneficiary's bank accepts a payment order, the bank is obliged to pay the amount of the order to the beneficiary of the order. Payment is due on the payment date of the order, but if acceptance occurs on the payment date after the close of the funds-transfer business day of the bank, payment is due on the next funds-transfer business day. If the bank refuses to pay after demand by the beneficiary and receipt of notice of particular circumstances that will give rise to consequential damages as a result of nonpayment, the beneficiary may recover damages resulting from the refusal to pay to the extent the bank had notice of the damages, unless the bank proves that it did not pay because of a reasonable doubt concerning the right of the beneficiary to payment.
(b) If a payment order accepted by the beneficiary's bank instructs payment to an account of the beneficiary, the bank is obliged to give notice to the beneficiary of receipt of the order before midnight of the next funds-transfer business day following the payment date. If the payment order does not instruct payment to an account of the beneficiary, the bank is required to notify the beneficiary only if notice is required by the order. Notice may be given by first class mail or any other means reasonable in the circumstances. If the bank fails to give the required notice as required by this subsection, the bank is obliged to pay interest to the beneficiary on the amount of the payment order from the day notice should have been given until the day the beneficiary learned of receipt of the payment order by the bank. No other damages are recoverable. Reasonable attorney fees are also recoverable if demand for interest is made and refused before an action is brought on the claim.
(c) The right of a beneficiary to receive payment and damages as stated in subsection (a) may not be varied by agreement or a funds-transfer system rule. The right of a beneficiary to be notified as stated in subsection (b) may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is given notice of the rule before initiation of the funds transfer.
History: L. 1990, ch. 367, § 29; L. 1991, ch. 294, § 24; July 1.
KANSAS COMMENT, 1996
This section is identical to the 1995 Official Text.
Subsection (a) provides a beneficiary's bank which accepts (84-4a-209(b)) a payment order must pay the beneficiary, unless the payment order has been cancelled (84-4a-211(e)), or the beneficiary's bank is subject to a funds-transfer system rule which makes payments provisional until the bank receives payment (84-4a-405(d)), or the beneficiary's bank belongs to a group which shares the loss of failed settlement obligations and there is a loss (84-4a-405(e)). Payment is due on the payment date of the order. Unless the bank has refused to pay because of reasonable doubts of the right of the beneficiary to payment, the beneficiary can recover consequential damages if the bank has refused to pay the beneficiary after the beneficiary has demanded payment and has warned the bank of the nature of the damages. Official Comment 2 indicates that the notice of consequential damages must be fairly specific. The beneficiary's rights to damages cannot be varied by agreement, under subsection (c).
Subsection (b) provides that the beneficiary is entitled to notice if the item is paid to an account of the beneficiary and not directly to the beneficiary, but subsection (c) allows this to be varied by agreement. If notice is due, the beneficiary is entitled to interest for the period until notice is given, and damages include attorney fees if payment is denied after demand.