KRS 355.4A-406: Payment by originator to beneficiary -- Discharge of underlying

obligation.

(1) Subject to KRS 355.4A -211(5), 355.4A-405(4), and 355.4A -405(5), the originator

of a funds transfer pays the beneficiary of the originator's payment order:

(a) At the ti me a payment order for the benefit of the beneficiary is accepted by

the beneficiary's bank in the funds transfer; and

(b) 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.

(2) If payment under subsection (1) 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:

(a) The payment under subsection (1) was made by a means prohibited by the

contract of the beneficiary with respect to the obligation;

(b) 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;

(c) Funds with respect to the order were not withdrawn by the beneficiary or

applied to a debt of the beneficiary; and

(d) 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 KRS 355.4A-404(1).

(3) For t he purpose of determining whether discharge of an obligation occurs under

subsection (2), 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 (1) 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.

(4) Rights of the originator or o f the beneficiary of a funds transfer under this section

may be varied only by agreement of the originator and the beneficiary.