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Can you summarize IC 26-1-4-406?
Bank Deposits and Collections > Customer's duty to discover and report unauthorized signature or alteration
Short Summary
This legal document, governed by the Indiana Code, specifically the Commercial Law section of the Uniform Commercial Code, outlines the duty of customers to discover and report unauthorized signatures or alterations. According to the document, if a bank sends or makes available a statement of account or items to a customer, the customer must exercise reasonable promptness in examining the statement or items to determine if any payment was unauthorized due to an alteration or unauthorized signature. If the customer should have reasonably discovered the unauthorized payment based on the provided statement or items, they must promptly notify the bank. Failure to comply with these duties may preclude the customer from asserting against the bank the unauthorized signature or alteration. The bank may also be precluded from asserting the preclusion if the customer proves that the bank did not pay the item in good faith. Additionally, if the customer does not discover and report the unauthorized signature or alteration within one year after the statement or items are made available, they are precluded from asserting against the bank. It is important for customers to comply with these duties to avoid potential preclusions and to protect their rights in relation to unauthorized signatures or alterations.
Whom does it apply to?
Customers of banks
What does it govern?
Customer's duty to discover and report unauthorized signature or alteration
What are exemptions?
No exemptions are mentioned.
What are the Penalties?
The customer may be precluded from asserting against the bank the unauthorized signature or alteration if the bank proves that the customer failed to comply with their duties and the bank suffered a loss as a result.
Jurisdiction
Indiana