N.D. Cent. Code § 41-04.1-17

(7) Under Section 4A-209(b)(1), the beneficiary’s bank can accept a payment order by paying the beneficiary. In the normal case of crediting an account of the beneficiary, payment occurs when the beneficiary is given notice of the right to withdraw the credit, the credit is applied to a debt of the beneficiary, or “funds with respect to the order” are otherwise made available to the beneficiary. Section 4A-405(a). The quoted phrase covers cases in which funds are made available to the beneficiary as a result of receipt of a payment order for the benefit of the beneficiary but the release of funds is not expressed as payment of the order. For example, the beneficiary’s bank might express a release of funds equal to the amount of the order as a “loan” that will be automatically repaid when the beneficiary’s bank receives payment by the sender of the order. If the release of funds is designated as a loan pursuant to a routine practice of the bank, the release is conditional payment of the order rather than a loan, particularly if normal incidents of a loan such as the signing of a loan agreement or note and the payment of interest are not present. Such a release of funds is payment to the beneficiary under Section 4A-405(a). Under Section 4A-405(c) the bank cannot recover the money from the beneficiary if the bank does not receive payment from the sender of the payment order that it accepted. Exceptions to this rule are stated in § 4A-405(d) and (e). The beneficiary’s bank may also accept by notifying the beneficiary that the order has been received. “Notifies” is defined in Section 1-201(26). In some cases a beneficiary’s bank will receive a payment order during the day but settlement of the sender’s obligation to pay the order will not occur until the end of the day. If the beneficiary’s bank wants to defer incurring liability to the beneficiary until the beneficiary’s bank receives payment, it can do so. The beneficiary’s bank incurs no liability to the beneficiary with respect to a payment order that it receives until it accepts the order. If the bank does not accept pursuant to subsection (b)(1), acceptance does not occur until the end of the day when the beneficiary’s bank receives settlement. If the sender settles, the payment order will be accepted under subsection (b)(2) and the funds will be released to the beneficiary the next morning. If the sender doesn’t settle, no acceptance occurs. In either case the beneficiary’s bank suffers no loss.

(8) In most cases the beneficiary’s bank will receive a payment order from another bank. If the sender is a bank and the beneficiary’s bank receives payment from the sender by final settlement through the Federal Reserve System or a funds transfer system (Section 4A-403(a)(1)) or, less commonly, through credit to an account of the beneficiary’s bank with the sender or another bank (Section 4A-403(a)(2)), acceptance by the beneficiary’s bank occurs at the time payment is made. Section 4A-209(b)(2). A minor exception to this rule is stated in Section 4A-209(c). Section 4A-209(b)(2) results in automatic acceptance of payment orders issued to a beneficiary’s bank by means of Fedwire because the Federal Reserve account of the beneficiary’s bank is credited and final payment is made to that bank when the payment order is received.

(9) Subsection (b)(3) covers cases of inaction by the beneficiary’s bank. It applies whether or not the sender is a bank and covers a case in which the sender and the beneficiary both have accounts with the receiving bank and payment will be made by debiting the account of the sender and crediting the account of the beneficiary. Subsection (b)(3) is similar to subsection (b)(2) in that it bases acceptance by the beneficiary’s bank on payment by the sender. Payment by the sender is effected by a debit to the sender’s account if the account balance is sufficient to cover the amount of the order. On the payment date (Section 4A-401) of the order the beneficiary’s bank will normally credit the beneficiary’s account and notify the beneficiary of receipt of the order if it is satisfied that the sender’s account balance covers the order or is willing to give credit to the sender. In some cases, however, the bank may not be willing to give credit to the sender and it may not be possible for the bank to determine until the end of the day on the payment date whether there are sufficient good funds in the sender’s account. There may be various transactions during the day involving funds going into and out of the account. Some of these transactions may occur late in the day or after the close of the banking day. To accommodate this situation, subsection (b)(3) provides that the status of the account is determined at the opening of the next funds transfer business day of the beneficiary’s bank after the payment date of the order. If the sender’s account balance is sufficient to cover the order, the beneficiary’s bank has a source of payment and the result in almost all cases is that the bank accepts the order at that time if it did not previously accept under subsection (b)(1). In rare cases, a bank may want to avoid acceptance under subsection (b)(3) by rejecting the order as discussed in Comment 8.

(10) Section 4A-209 is based on a general principle that a receiving bank is not obliged to accept a payment order unless it has agreed or is bound by a funds transfer system rule to do so. Thus, provision is made to allow the receiving bank to prevent acceptance of the order. This principle is consistently followed if the receiving bank is not the beneficiary’s bank. If the receiving bank is not the beneficiary’s bank, acceptance is in the control of the receiving bank because it occurs only if the order is executed. But in the case of the beneficiary’s bank acceptance can occur by passive receipt of payment under subsection (b)(2) or (3). In the case of a payment made by Fedwire acceptance cannot be prevented. In other cases the beneficiary’s bank can prevent acceptance by giving notice of rejection to the sender before payment occurs under Section 4A-403(a)(1) or (2). A minor exception to the ability of the beneficiary’s bank to reject is stated in Section 4A-502(c)(3).

(11) Subsection (d) applies only to a payment order by the originator of a funds transfer to the originator’s bank and it refers to the following situation. On April 1, Originator instructs Bank A to make a payment on April 15 to the account of Beneficiary in Bank B. By mistake, on April 1, Bank A executes Originator’s payment order by issuing a payment order to Bank B instructing immediate payment to Beneficiary. Bank B credited Beneficiary’s account and immediately released the funds to Beneficiary. Under subsection (d) no acceptance by Bank A occurred on April 1 when Originator’s payment order was executed because acceptance cannot occur before the execution date which in this case would be April 15 or shortly before that date. Section 4A-301(b). Under Section 4A-402(c), Originator is not obliged to pay Bank A until the order is accepted and that can’t occur until the execution date. But Bank A is required to pay Bank B when Bank B accepted Bank A’s order on April 1. Unless Originator and Beneficiary are the same person, in almost all cases Originator is paying a debt owed to Beneficiary and early payment does not injure Originator because Originator does not have to pay Bank A until the execution date. Section 4A-402(c). Bank A takes the interest loss. But suppose that on April 3, Originator concludes that no debt was owed to Beneficiary or that the debt was less than the amount of the payment order. Under Section 4A-211(b) Originator can cancel its payment order if Bank A has not accepted. If early execution of Originator’s payment order is acceptance, Originator can suffer a loss because cancellation after acceptance is not possible without the consent of Bank A and Bank B. Section 4A-211(c). If Originator has to pay Bank A, Originator would be required to seek recovery of the money from Beneficiary. Subsection (d) prevents this result and puts the risk of loss on Bank A by providing that the early execution does not result in acceptance until the execution date. Since on April 3 Originator’s order was not yet accepted, Originator can cancel it under Section 4A-211(b). The result is that Bank A is not entitled to payment from Originator but is obliged to pay Bank B. Bank A has paid Beneficiary by mistake. If Originator’s payment order is cancelled, Bank A becomes the originator of an erroneous funds transfer to Beneficiary. Bank A has the burden of recovering payment from Beneficiary on the basis of a payment by mistake. If Beneficiary received the money in good faith in payment of a debt owed to Beneficiary by Originator, the law of mistake and restitution may allow Beneficiary to keep all or part of the money received. If Originator owed money to Beneficiary, Bank A has paid Originator’s debt and, under the law of restitution, which applies pursuant to Section 1-103, Bank A is subrogated to Beneficiary’s rights against Originator on the debt.