Colorado § 4-3-418 - Payment or acceptance by mistake.

§ 4-3-418. Payment or acceptance by mistake.

(a) Except as provided in subsection (c) of this section, if the drawee of a draft pays or accepts the draft and the drawee acted on the mistaken belief that (i) payment of the draft had not been stopped pursuant to section 4-4-403 or (ii) the signature of the drawer of the draft was authorized, the drawee may recover the amount of the draft from the person to whom or for whose benefit payment was made or, in the case of acceptance, may revoke the acceptance. Rights of the drawee under this subsection are not affected by failure of the drawee to exercise ordinary care in paying or accepting the draft.

(b) Except as provided in subsection (c) of this section, if an instrument has been paid or accepted by mistake and the case is not covered by subsection (a) of this section, the person paying or accepting may, to the extent permitted by the law governing mistake and restitution, (i) recover the payment from the person to whom or for whose benefit payment was made or (ii) in the case of acceptance, may revoke the acceptance.

(c) The remedies provided by subsection (a) or (b) of this section may not be asserted against a person who took the instrument in good faith and for value or who in good faith changed position in reliance on the payment or acceptance. This subsection does not limit remedies provided by section 4-3-417 or 4-4-407.

(d) Notwithstanding section 4-4-215, if an instrument is paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance under subsection (a) or (b) of this section, the instrument is deemed not to have been paid or accepted and is treated as dishonored, and the person from whom payment is recovered has rights as a person entitled to enforce the dishonored instrument.

Source: L. 94: Entire article R&RE, p. 871, § 1, effective January 1, 1995.

Editor's note: This section is similar to former § 4-3-418 as it existed prior to 1994.

ANNOTATION

Section and comments, when read together with § 4-4-215 and comments, treat a cashier's check as the equivalent of cash and preclude issuing banks from dishonoring them at any time. Flatiron Linen, Inc. v. First Amer. State Bank, 23 P.3d 1209 (Colo. 2001).

Cashier's checks represent the unconditional obligation of the issuing bank to pay, and therefore, banks may not dishonor their cashier's checks once issued. Flatiron Linen, Inc. v. First Amer. State Bank, 23 P.3d 1209 (Colo. 2001).

Where payee took check as a refund for a loan commission and without knowledge of a stop payment order on the check, payee took the check for value and in good faith, and the drawee bank has no remedies against the payee for its mistaken payment of the check. Flatiron Linen, Inc. v. First Amer. State Bank, 23 P.3d 1209 (Colo. 2001).