Title 11, Chapter 4, Section 406
Customer's duty to discover and report unauthorized signature or alteration.
(a) A bank that sends or makes available to a customer a statement
of account showing payment of items for the account shall either
return or make available to the customer the items paid or provide
information in the statement of account sufficient to allow the
customer reasonably to identify the items paid. The statement of
account provides sufficient information if the item is described by
item number, amount, and date of payment.
(b) If the items are not returned to the customer, the person
retaining the items shall either retain the items or, if the items
are destroyed, maintain the capacity to furnish legible copies of
the items until the expiration of seven years after receipt of the
items. A customer may request an item from the bank that paid the
item, and that bank must provide in a reasonable time either the
item or, if the item has been destroyed or is not otherwise
obtainable, a legible copy of the item.
(c) If a bank sends or makes available a statement of account or
items pursuant to subsection (a) of this Code section, the customer
must exercise reasonable promptness in examining the statement or
the items to determine whether any payment was not authorized
because of an alteration of an item or because a purported signature
by or on behalf of the customer was not authorized. If, based on the
statement or items provided, the customer should reasonably have
discovered the unauthorized payment, the customer must promptly
notify the bank of the relevant facts.
(d) If the bank proves that the customer failed, with respect to an
item, to comply with the duties imposed on the customer by
subsection (c) of this Code section, the customer is precluded from
asserting against the bank:
(1) The customer's unauthorized signature or any alteration on the
item, if the bank also proves that it suffered a loss by reason of
the failure; and
(2) The customer's unauthorized signature or alteration by the
same wrongdoer on any other item paid in good faith by the bank if
the payment was made before the bank received notice from the
customer of the unauthorized signature or alteration and after the
customer had been afforded a reasonable period of time, not
exceeding 30 days, in which to examine the item or statement of
account and notify the bank.
(e) If subsection (d) of this Code section applies and the customer
proves that the bank failed to exercise ordinary care in paying the
item and that the failure substantially contributed to loss, the
loss is allocated between the customer precluded and the bank
asserting the preclusion according to the extent to which the
failure of the customer to comply with subsection (c) of this Code
section and the failure of the bank to exercise ordinary care
contributed to the loss. If the customer proves that the bank did
not pay the item in good faith, the preclusion under subsection (d)
of this Code section does not apply.
(f) Without regard to care or lack of care of either the customer or
the bank, a customer who does not within 60 days after the statement
or items are made available to the customer (subsection (a) of this
Code section) discover and report the customer's unauthorized
signature on or any alteration on the face of the item or who does
not within one year from that time discover and report any
unauthorized indorsement or alteration on the back of the item is
precluded from asserting against the bank the unauthorized
signature, indorsement, or alteration.
If there is a preclusion under this subsection, the payor bank may not recover for breach of warranty under Code Section 11-4-208 with respect to the unauthorized signature or alteration to which the preclusion applies.