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“Time and Manner” Rule in Funds Transfers While the receiving bank must follow the sender’s instructions concerning the means of execution, the bank may use “like kind” services. Thus, for example, if the payment order specifies “U.S. Postal Service Next-Day Mail Service,” the receiving bank may use Federal Express next-day service instead because the Federal Express service would likely be considered a means “as expeditious as the means stated” in the payment order. The receiving bank must also follow the sender’s instructions with respect to the type of funds transfer system to be used in carrying out the funds transfer. If the payment order specifies the use of the Fedwire® Funds Service, the bank is obliged to execute the payment order by the Fedwire® Funds Service and to instruct any intermediary bank to do likewise. The bank may, however, disregard such instructions if it determines, in good faith, that the use of the specified system would not be feasible or would unduly delay completion of the funds transfer. Good faith for these purposes is defined in Section 4A-105(a)(6) to include “the observance of reasonable commercial standards of fair dealing.” The receiving bank must also follow the sender’s instructions with respect to the use of a particular intermediary bank No discretion similar to the right of the receiving bank to disregard the sender’s instruction concerning the funds transfer system is conferred on the receiving bank with respect to a direction to use a specific intermediary bank. Thus, if the payment order instructs the bank to use the Federal Reserve Bank of New York as the intermediary bank, for example, the receiving bank must transmit its payment order, directly or indirectly, to the Federal Reserve Bank of New York. The receiving bank might have to send the payment order to another intermediary bank with directions to send the order to the Federal Reserve Bank of New York if the receiving bank does not have a correspondent relationship with the Federal Reserve Bank of New York. But the receiving bank cannot circumvent the designated intermediary altogether. If no funds transfer system is specified, the receiving bank may use whatever system is reasonable in the circumstances. Likewise, if no intermediary bank is specified, the receiving bank may select a bank through which a payment order conforming to the sender’s payment order can expeditiously be issued to the beneficiary’s bank, provided that the receiving bank exercises ordinary care in the selection of the intermediary bank. |
