“Payment date” of a payment order means the day on which the amount of the order is payable to the beneficiary by the beneficiary’s bank. The payment date may be determined by instruction of the sender but cannot be earlier than the day the order is received by the beneficiary’s bank and, unless otherwise determined, is the day the order is received by the beneficiary’s bank.
Chapter 4Payment
Section § 11401
The 'payment date' refers to the day a bank must pay the beneficiary as per the payment order. This date can be set by the sender's instructions, but it can't be before the bank gets the order. If no specific instructions are given, the payment date is when the bank receives the order.
payment order beneficiary beneficiary's bank payment date sender instruction order receipt payable date bank payment obligation instruction compliance financial transaction timing
Section § 11402
This law explains how payments through banks should work, specifically when sending funds to a recipient's or intermediary bank. If a bank accepts a payment order, the person who initiated the payment, called the sender, is responsible for paying the bank the amount specified in the order, but not immediately—only by the designated payment date. If the bank completes the transaction, the sender must pay; if not, the sender could get their money back. If a payment fails or the intermediary bank can't repay the sender due to legal restrictions or financial issues, alternative refund methods are described. Importantly, you can't override these rules with a different agreement.
(a)CA Commercial Law Code § 11402(a) This section is subject to Sections 11205 and 11207.
(b)CA Commercial Law Code § 11402(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)CA Commercial Law Code § 11402(c) This subdivision is subject to subdivision (e) and to Section 11303. 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 that sender’s payment order.
(d)CA Commercial Law Code § 11402(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 Sections 11204 and 11304, interest is payable on the refundable amount from the date of payment.
(e)CA Commercial Law Code § 11402(e) If a funds transfer is not completed as stated in subdivision (c) and an intermediary bank is obliged to refund payment as stated in subdivision (d) but is unable to do so because it is 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 paragraph (1) of subdivision (a) of Section 11302, 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 subdivision (d).
(f)CA Commercial Law Code § 11402(f) The right of the sender of a payment order to be excused from the obligation to pay the order as stated in subdivision (c) or to receive refund under subdivision (d) may not be varied by agreement.
payment order beneficiary’s bank receiving bank sender obligation payment date execution date funds transfer refund payment intermediary bank payment suspension instruction compliance routing funds subrogation rights obligation excusal non-varied agreement
Section § 11403
This law explains how and when a bank's obligation to pay another bank is considered fulfilled in different scenarios. If one bank pays another through a Federal Reserve Bank or a funds-transfer system, payment happens when the receiving bank gets the final settlement. If the sender credits the receiving bank's account, payment occurs when the funds are either withdrawn or become available by midnight that day. If the receiving bank subtracts the amount from an account of the sender, payment is made as long as there is enough credit balance. In funds-transfer systems where banks settle payments by offsetting mutual obligations, settlement is complete when the system's rules are fulfilled. Banks can also settle through mutual setoffs at the end of the day, which means both have paid each other. If none of these scenarios apply, general laws about satisfying obligations are used to decide when payment happens.
(a)CA Commercial Law Code § 11403(a) Payment of the sender’s obligation under Section 11402 to pay the receiving bank occurs as follows:
(1)CA Commercial Law Code § 11403(a)(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)CA Commercial Law Code § 11403(a)(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)CA Commercial Law Code § 11403(a)(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)CA Commercial Law Code § 11403(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 subdivision has been exercised.
(c)CA Commercial Law Code § 11403(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 Section 11402 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)CA Commercial Law Code § 11403(d) In a case not covered by subdivision (a), the time when payment of the sender’s obligation under subdivision (b) or (c) of Section 11402 occurs is governed by applicable principles of law that determine when an obligation is satisfied.
sender's obligation receiving bank final settlement Federal Reserve Bank funds-transfer system credit withdrawal mutual obligations netting debit withdrawable credit balance setoff aggregate balance multilateral netting settlement payment order
Section § 11404
This law describes the obligations of a bank when it accepts a payment order for a beneficiary. If the bank accepts the order, it must pay the beneficiary by the date specified in the order, unless it accepts the order after its business hours, in which case payment is due the next business day. If the bank refuses to pay after being asked by the beneficiary, and the beneficiary had warned the bank of specific damages that could result, the beneficiary can claim those damages unless the bank had a good reason for not paying. If the order directs payment to the beneficiary's account, the bank must notify the beneficiary by the end of the next business day. Failing to inform when required can lead to the bank owing interest to the beneficiary. However, the right to be notified can be changed if both parties agree. Attorney fees can be recovered if interest is demanded but not paid before legal action is taken.
(a)CA Commercial Law Code § 11404(a) Subject to subdivision (e) of Section 11211, and subdivisions (d) and (e) of Section 11405, 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)CA Commercial Law Code § 11404(b) If a payment order accepted by the beneficiary’s bank instructs payment to an
account of the beneficiary, the bank is obliged to notify 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, 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’s fees are also recoverable if demand for interest is made and refused before an action is brought on the claim.
(c)CA Commercial Law Code § 11404(c) The right of a beneficiary to receive payment and damages as stated in subdivision (a) may not be varied by agreement
or a funds-transfer system rule. The right of a beneficiary to be notified as stated in subdivision (b) may be varied by agreement of the beneficiary or by a funds-transfer system rule if the beneficiary is notified of the rule before initiation of the funds transfer.
beneficiary's bank obligations payment order consequential damages funds-transfer business day interest payment for late notice reasonable attorney’s fees notice of receipt of payment order reasonable doubt about payment variation by agreement transfer system rule
Section § 11405
This section explains when a bank fulfills its obligation to a beneficiary regarding a payment order. If the beneficiary’s account is credited, the obligation is met when the beneficiary is notified, when the credit is applied to a debt, or when funds are made available. If the account isn’t credited, general legal principles decide when the obligation is completed. Payments can sometimes be provisional—meaning they might be reversed—under specific conditions agreed upon by all parties involved and if everyone is informed beforehand. If a payment system nets obligations and doesn’t settle as expected, the transaction can be nullified. In such cases, the beneficiary might have to return the payment, and no payment is considered made by the originator.
(a)CA Commercial Law Code § 11405(a) If the beneficiary’s bank credits an account of the beneficiary of a payment order, payment of the bank’s obligation under subdivision (a) of Section 11404 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)CA Commercial Law Code § 11405(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 subdivision (a) of Section 11404 occurs is governed by principles of law that determine when an obligation is satisfied.
(c)CA Commercial Law Code § 11405(c) Except as stated in subdivisions (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)CA Commercial Law Code § 11405(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 Section 11406.
(e)CA Commercial Law Code § 11405(e) This subdivision 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 Section 11406, and
(iv) subject to subdivision (e) of Section 11402, each sender in the funds transfer is excused from its obligation to pay its payment order under subdivision (c) of Section 11402 because the funds transfer has not been completed.
beneficiary bank payment order credit account debt application funds availability provisional payment refund entitlement notice requirement nullified acceptance netting obligations loss-sharing agreement settlement rules funds transfer system originator obligation satisfaction
Section § 11406
This law section explains how and when a person who starts a funds transfer pays the person who is supposed to receive the money. The payment happens when the bank of the person receiving the money (the beneficiary) accepts the transfer, and it should be for the amount stated in the original transfer order. If this payment settles a debt, the debt is considered paid off unless the payment method is not allowed by the contract, the beneficiary refuses the payment quickly, the money hasn't been used by the beneficiary, and a different payment method could have saved the beneficiary from a loss. If the debt isn't settled, the person who sent the money (the originator) gets the right to claim the money from the bank like the beneficiary would. If bank fees reduce the amount received, the originator must cover those fees if the beneficiary demands it. The terms of payment can be changed only if both the originator and the beneficiary agree to it.
(a)CA Commercial Law Code § 11406(a) Subject to subdivision (e) of Section 11211 and subdivisions (d) and (e) of Section 11405, the originator of a funds transfer pays the beneficiary of the originator’s payment order (i) at the time a payment order for the benefit of the beneficiary is accepted by the beneficiary’s bank in the funds transfer and (ii) in an amount equal to the amount of the order accepted by the beneficiary’s bank, but not more than the amount of the originator’s order.
(b)CA Commercial Law Code § 11406(b) If payment under subdivision (a) is made to satisfy an obligation, the obligation is discharged to the same extent discharge would result from payment to the beneficiary of the same amount in money, unless (i) the payment under subdivision (a) was made by a means prohibited by the contract of the beneficiary with respect to the obligation, (ii) the beneficiary, within a reasonable time after receiving notice of receipt of the order by the beneficiary’s bank, notified the originator of
the beneficiary’s refusal of the payment, (iii) funds with respect to the order were not withdrawn by the beneficiary or applied to a debt of the beneficiary, and (iv) the beneficiary would suffer a loss that could reasonably have been avoided if payment had been made by a means complying with the contract. If payment by the originator does not result in discharge under this section, the originator is subrogated to the rights of the beneficiary to receive payment from the beneficiary’s bank under subdivision (a) of Section 11404.
(c)CA Commercial Law Code § 11406(c) For the purpose of determining whether discharge of an obligation occurs under subdivision (b), if the beneficiary’s bank accepts a payment order in an amount equal to the amount of the originator’s payment order less charges of one or more receiving banks in the funds transfer, payment to the beneficiary is deemed to be in the amount of the originator’s order unless upon demand by the beneficiary the originator does not pay the beneficiary the
amount of the deducted charges.
(d)CA Commercial Law Code § 11406(d) Rights of the originator or of the beneficiary of a funds transfer under this section may be varied only by agreement of the originator and the beneficiary.
funds transfer payment order originator beneficiary bank acceptance discharge of obligation contract restrictions subrogation bank charges agreement payment refusal debt settlement payment deduction receiving bank payment compliance
