Colorado § 4-4-401 - When bank may charge customer's account.

§ 4-4-401. When bank may charge customer's account.

(a) A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.

(b) A customer is not liable for the amount of an overdraft if the customer neither signed the item nor benefited from the proceeds of the item.

(c) A bank may charge against the account of a customer a check that is otherwise properly payable from the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty. The notice is effective for the period stated in section 4-4-403 (b) for stop-payment orders, and must be received at such time and in such manner as to afford the bank reasonable opportunity to act on it before the bank takes any action with respect to the check described in section 4-4-303. If a bank charges against the account of a customer a check before the date stated in the notice of postdating, the bank is liable for damages for the loss resulting from its act. The loss may include damages for dishonor of subsequent items under section 4-4-402.

(d) A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to:

(1) The original terms of the altered item; or

(2) The terms of the completed item, even though the bank knows the item has been completed unless the bank has notice that the completion was improper.

Source: L. 94: Entire article amended with relocations, p. 899, § 2, effective January 1, 1995.

ANNOTATION

Law reviews. For article, "Payee v. Depository Bank: What is the UCC Defense to Handling Checks Bearing Forged Indorsements?", see 45 U. Colo. L. Rev. 281 (1974). For article, "Civil Liability for Check Forgeries in Colorado", see 16 Colo. Law. 959 (1987).

Customer's failure to prove loss. A partnership that could not meet its burden of proving that a bank's improper payment of drafts drawn on the partnership's account caused the partnership to suffer a loss could not have its account recredited for the amount of the draft payments. Isaac v. Am. Heritage Bank & Trust Co., 675 P.2d 742 (Colo. 1984).

Liability of maker on instrument. Although a stop-payment order on a postdated check forbids payment by the bank to the payee or endorser, the maker remains liable on the instrument. Esecson v. Bushnell, 663 P.2d 258 (Colo. App. 1983).