N.Y. Uniform Commercial Code Law § 4-a-406: Payment by Originator to Beneficiary; Discharge of Underlying Obligation

Section 4-A-406. Payment by Originator to Beneficiary; Discharge of

Underlying Obligation.

(1) Subject to subsection (5) of Section 4-A-211 and subsections (4)

and (5) of Section 4-A-405, 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.

(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 (i)

the payment under subsection (1) 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order were not withdrawn by the beneficiary or applied to a debt of the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 subsection (1) of Section 4-A-404.

(3) For the 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 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 of the beneficiary of a funds transfer

under this section may be varied only by agreement of the originator and

the beneficiary.