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If a receiving bank has received payment from its customer with respect to a payment order issued in the name of the customer as sender and accepted by the bank, and the customer received notification reasonably identifying the order, the customer is precluded from asserting that the bank is not entitled to retain the payment unless the customer notifies the bank of the customer's objection to the payment within one year after the notification was received by the customer.

This section is in the nature of a statute of repose for objecting to debits made to the customer's account. A receiving bank that executes payment orders of a customer may have received payment from the customer by debiting the customer's account with respect to a payment order that the customer was not required to pay. For example, the payment order may not have been authorized or verified pursuant to Section 4A-202 or the funds transfer may not have been completed. In either case the receiving bank is obliged to refund the payment to the customer and this obligation to refund payment cannot be varied by agreement. Section 4A-204 and Section 4A-402. Refund may also be required if the receiving bank is not entitled to payment from the customer because the bank erroneously executed a payment order. Section 4A-303. A similar analysis applies to that case. Section 4A-402(d) and (f) require refund and the obligation to refund may not be varied by agreement. Under 4A-505, however, the obligation to refund may not be asserted by the customer if the customer has not objected to the debiting of the account within one year after the customer received notification of the debit.

Section 36-4A-506. Rate of interest.

(a) If, under this chapter, a receiving bank is obliged to pay interest with respect to a payment order issued to the bank, the amount payable may be determined (i) by agreement of the sender and receiving bank, or (ii) by a funds-transfer system rule if the payment order is transmitted through a funds- transfer system.

(b) If the amount of interest is not determined by an agreement or rule as stated in subsection (a), the amount is calculated by multiplying the applicable Federal Funds rate by the amount on which interest is payable, and then multiplying the product by the number of days for which interest is payable. The applicable Federal Funds rate is the average of the Federal Funds rates published by the Federal Reserve Bank of New York

1. A receiving bank is required to pay interest on the amount of a payment order received by the bank in a number of situations. Sometimes the interest is payable to the sender and in other cases it is payable to either the originator or the beneficiary of the funds transfer. The relevant provisions are Section 4A-204(a), Section 4A-209(b) (3), Section 4A-210(b), Section 4A-305(a), Section 4A-402(d) and Section 4A-404(b). The rate of interest may be governed by a funds transfer system rule or by agreement as stated in subsection (a). If subsection (a) doesn't apply, the rate is determined under subsection (b). Subsection (b) is illustrated by the following example. A bank is obliged to pay interest on $1,000,000 for three days, July 3, July 4, and July 5. The published Fed Funds rate is .082 for July 3 and .081 for July 5. There is no published rate for July 4 because that day is not a banking day. The rate for July 3 applies to July 4. The applicable Fed Funds rate is .08167 (the average of .082, .082, and .081) divided by 360 which equals .0002268. The amount of interest payable is $1,000,000 X .0002268 X 3 = $680.40.

2. In some cases, interest is payable in spite of the fact that there is no fault by the receiving bank. The last sentence of subsection (b) applies to those cases. For example, a funds transfer might not be completed because the beneficiary's bank rejected the payment order issued to it by the originator's bank or an intermediary bank. Section 4A-402(c) provides that the originator is not obliged to pay its payment order and Section 4A-402(d) provides that the originator's bank must refund any payment received plus interest. The requirement to pay interest in this case is not based on fault by the originator's bank. Rather, it is based on restitution. Since the originator's bank had the use of the originator's money, it is required to pay the originator for the value of that use. The value of that use is not determined by multiplying the interest rate by the refundable amount because the originator's bank is required to deposit with the Federal Reserve a percentage of the bank's deposits as a reserve requirement. Since that deposit does not bear interest, the bank had use

Section 36-4A-507. Choice of law.

(a) The following rules apply unless the affected parties otherwise agree or subsection (c) applies:

(1) The rights and obligations between the sender of a payment order and the receiving bank are governed by the law of the jurisdiction in which the receiving bank is located.

(2) The rights and obligations between the beneficiary's bank and the beneficiary are governed by the law of the jurisdiction in which the beneficiary's bank is located.

(3) The issue of when payment is made pursuant to a funds transfer by the originator to the beneficiary is governed by the law of the jurisdiction in which the beneficiary's bank is located.

(b) If the parties described in each paragraph of subsection (a) have made an agreement selecting the law of a particular jurisdiction to govern rights and obligations between each other, the law of that jurisdiction governs those rights and obligations, whether or not the payment order or the funds transfer bears a reasonable relation to that jurisdiction.

(c) A funds-transfer system rule may select the law of a particular jurisdiction to govern (i) rights and obligations between participating banks with respect to payment orders transmitted or processed through the system, or (ii) the rights and obligations of some or all parties to a funds transfer any part of which is carried out by means of the system. A choice of law made pursuant to clause (i) is binding on participating banks. A choice of law made pursuant to clause (ii) is binding on the originator, other sender, or a receiving bank having notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system when the originator, other sender, or receiving bank issued or accepted a payment order. The beneficiary of a funds transfer is bound by the choice of law if, when the funds transfer is initiated, the beneficiary has notice that the funds-transfer system might be used in the funds transfer and of the choice of law by the system. The law of a jurisdiction selected pursuant to this subsection may govern, whether or not that law bears a reasonable relation to the matter in issue.

(d) In the event of inconsistency between an agreement under subsection (b) and a choice-of-law rule under subsection (c), the agreement under subsection (b) prevails.

1. Funds transfers are typically interstate or international in character. If part of a funds transfer is governed by Article 4A and another part is governed by other law, the rights and obligations of parties to the funds transfer may be unclear because there is no clear consensus in various jurisdictions concerning the juridical nature of the transaction. Unless all of a funds transfer is governed by a single law it may be very difficult to predict the result if something goes wrong in the transfer. Section 4A-507 deals with this problem. Subsection (b) allows parties to a funds transfer to make a choice-of-law agreement. Subsection (c) allows a funds transfer system to select the law of a particular jurisdiction to govern funds transfers carried out by means of the system. Subsection (a) states residual rules if no choice of law has occurred under subsection (b) or subsection (c).

2. Subsection (a) deals with three sets of relationships. Rights and obligations between the sender of a payment order and the receiving bank are governed by the law of the jurisdiction in which the receiving bank is located. If the receiving bank is the beneficiary's bank the rights and obligations of the beneficiary are also governed by the law of the jurisdiction in which the receiving bank is located. Suppose Originator, located in Canada, sends a payment order to Originator's Bank located in a state in which Article 4A has been enacted. The order is for payment to an account of Beneficiary in a bank in England. Under subsection (a)(1), the rights and obligations of Originator and Originator's Bank toward each other are governed by Article 4A if an action is brought in a court in the Article 4A state. If an action is brought in a Canadian court, the conflict of laws issue will be determined by Canadian law which might or might not apply the law of the state in which Originator's Bank is located. If that law is applied, the execution of Originator's order will be governed by Article 4A, but with respect to the payment order of Originator's Bank to the English bank, Article 4A may or may not be applied with respect to the rights and obligations between the two banks. The result may depend upon whether action is brought in a court in the state in which Originator's Bank is located or in an English court. Article 4A is binding only on a court in a state that enacts it. It can have extraterritorial effect only to the extent courts of another jurisdiction are

Under Section 4A-406 payment by the originator to the beneficiary of the funds transfer occurs when the beneficiary's bank accepts a payment order for the benefit of the beneficiary. A jurisdiction in which Article 4A is not in effect may follow a different rule or it may not have a clear rule. Under Section 4A-507(a)(3) the issue is governed by the law of the jurisdiction in which the beneficiary's bank is located. Since the payment to the beneficiary is made through the beneficiary's bank it is reasonable that the issue of when payment occurs be governed by the law of the jurisdiction in which the bank is located. Since it is difficult in many cases to determine where a beneficiary is located, the location of the beneficiary's bank provides a more certain rule.

3. Subsection (b) deals with choice-of-law agreements and it gives maximum freedom of choice. Since the law of funds transfers is not highly developed in the case law there may be a strong incentive to choose the law of a jurisdiction in which Article 4A is in effect because it provides a greater degree of certainly with respect to the rights of various parties. With respect to commercial transactions, it is often said that "[u]niformity and predictability based upon commercial convenience are the prime considerations in making the choice of governing law . . . ." R. Leflar, American Conflicts Law, Section 185 (1977). Subsection (b) is derived in part from recently enacted choice-of-law rules in the States of New York and California. N.Y. Gen. Obligations Law 5-1401 (McKinney's 1989 Supp.) and California Civil Code Section 1646.5. This broad endorsement of freedom of contract is an enhancement of the approach taken by Restatement (Second) of Conflict of Laws Section 187(b) (1971). The Restatement recognizes the basic right of freedom of contract, but the freedom granted the parties may be more limited than the freedom granted here. Under the formulation of the Restatement, if there is no substantial relationship to the jurisdiction whose law is selected and there is no "other" reasonable basis for the parties' choice, then the selection of the parties need not be honored by a court. Further, if the choice is violative of a fundamental policy of a state which has a materially greater interest than the chosen state, the selection could be disregarded by a court. Those limitations are not found in subsection (b).

4. Subsection (c) may be the most important provision in regard to creating uniformity of law in funds transfers. Most rights stated in Article 4A regard parties who are in privity of contract such as originator and beneficiary, sender and receiving bank, and beneficiary's bank and beneficiary. Since they are in privity they can make a choice of law by

Subsection (c) has broad application. A system choice of law applies not only to rights and obligations between banks that use the system, but may also apply to other parties to the funds transfer so long as some part of the transfer was carried out over the system. The originator and any other sender or receiving bank in the funds transfer is bound if at the time it issues or accepts a payment order it had notice that the funds transfer involved use of the system and that the system chose the law of a particular jurisdiction. Under Section 4A-107, the Federal Reserve by regulation could make a similar choice of law to govern funds transfers carried out by use of Federal Reserve Banks. Subsection (d) is a limitation on subsection (c). If parties have made a choice-of-law agreement that conflicts with a choice of law made under subsection (c), the agreement prevails.

5. Subsection (e) addresses the case in which a funds transfer involves more than one funds transfer system and the systems adopt conflicting choice-of-law rules. The rule that has the most significant relationship to the matter at issue prevails. For example, each system should be able to make a choice of law governing payment orders transmitted over that system without regard to a choice of law made by another system."

SECTION 3. Section 36-1-105(2) is amended to read:

"(2) Where one of the following provisions of this title specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law (including the conflict of laws rules) so specified:

Rights of seller's creditors against

sold goods. Section 36-2-402.

Applicability of the Chapter on

Bank Deposits and Collections.Section 36-4-102.

Chapter on Bulk Transfers.Section 36-6-102.

Applicability of the Chapter on

Investment Securities.Section 36-8-106.

Perfection provisions of the

Chapter on Secured Transactions.Section 36-9-103.

Governing law in the Chapter on

Funds Transfers. Section 36-4A-507."

SECTION 4. This act takes effect upon approval by the Governor.

Amend title to conform.

/s/Donald H. Holland /s/James H. Hodges
/s/Thomas L. Moore /s/Sandra S. Wofford
/s/H. Samuel Stilwell /s/Rebecca D. "Becky" Meacham

On Part of the Senate.On Part of the House.

, and a message was sent to the House accordingly.

Senator MOORE from the Committee of Conference on H. 4239, the Sine Die Resolution, submitted a favorable with amendment report on:

H. 4304 -- Reps. Haskins, Boan and D. Smith: A CONCURRENT RESOLUTION TO FIX 12:00 NOON ON TUESDAY, OCTOBER 24, 1995, AS THE TIME FOR ELECTING PERSONS TO FILL THE JUDICIAL OFFICES CREATED IN THE 1995-96 GENERAL APPROPRIATIONS ACT.

On motion of Senator MOORE, with unanimous consent, the Resolution was taken up for immediate consideration.

The Sine Die Committee proposed the following amendment (4304R001.GFM), which was adopted:

Amend the resolution, as and if amended, by striking all after the resolving clause and inserting the following:

/That the mandatory SINE DIE adjournment date for the General Assembly prescribed in Section 2-1-180 of the 1976 Code is extended, as authorized by that code section, to permit the General Assembly to continue in session under the terms and conditions set forth below. When the respective houses adjourn on or before 5:00 p.m. on Thursday, June

(1) When the respective houses of the General Assembly adjourn on Thursday, June 15, 1995, not later than 5:00 p.m., they shall stand adjourned to meet at 10:00 a.m. on June 16, 19, 20, 21, 22, and 23, 1995, for consideration of local and uncontested matters which have the unanimous consent of the members of the delegation affected by the legislation, the consideration of vetoes, and for consideration of resolutions expressing sympathy or congratulations, provided that the President of the Senate and the Speaker of the House are authorized to call their respective bodies back into statewide session on any of these dates for the purpose of considering gubernatorial vetoes and they are further authorized to meet on June 16, 19, 20, 21, 22, or 23 for the ratification of acts which have been enrolled.

(2) When each house adjourns on Friday, June 23, 1995, it shall stand adjourned SINE DIE./

Amend title to conform.

Senator MOORE explained the amendment.

The amendment was adopted.

The Resolution, as amended, was adopted, returned to the House with amendments.

On motion of Senator ELLIOTT, with unanimous consent, the appointment of magistrates from Horry County, if received from the Governor prior to Sine Die adjournment and which meet the necessary Senate requirements, would be confirmed.

At 5:15 P.M., Senator MOORE asked unanimous consent to make a motion to invite the House of Representatives to attend the Senate Chamber for the purpose of ratifying acts at 5:30 P.M.

There was no objection and a message was sent to the House accordingly.

On motion of Senator MOORE, with unanimous consent, the Senate agreed that upon the completion of the ratification of acts, the Senate

At 5:30 P.M., Senator MOORE asked unanimous consent to make a motion to invite the House of Representatives to attend the Senate Chamber for the purpose of ratifying acts at 11:30 A.M. on Thursday, June 15, 1995, and upon completion of the ratification of acts, the Senate would stand adjourned Sine Die, in accordance with the provisions of H. 4239, the Sine Die Resolution.

There was no objection and a message was sent to the House accordingly.

At 5:30 P.M., on motion of Senator MOORE, the Senate receded from business until Thursday, June 15, at 11:30 A.M.

The Senate reassembled at 11:30 A.M., on Thursday, June 15, 1995, and was called to order by the PRESIDENT.

Pursuant to an invitation the Honorable Speaker and House of Representatives appeared in the Senate Chamber on June 15, 1995, at 11:30 A.M. and the following Acts and Joint Resolution were ratified:

(R215) S. 101 -- Senators Leventis, Ryberg, Rose, Giese and Elliott: AN ACT TO AMEND SECTION 22-3-550, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO A MAGISTRATE'S JURISDICTION OVER CERTAIN CRIMINAL OFFENSES AND A MAGISTRATE'S AUTHORITY TO IMPOSE SENTENCES, SO AS TO REVISE THE CRIMINAL OFFENSES OVER WHICH MAGISTRATES HAVE JURISDICTION AND A MAGISTRATE'S AUTHORITY TO IMPOSE SENTENCES, AND TO PROVIDE THAT THE PROHIBITION AGAINST A MAGISTRATE SENTENCING ANY PERSON TO CONSECUTIVE TERMS OF IMPRISONMENT TOTALING MORE THAN NINETY DAYS DOES NOT APPLY TO SENTENCES FOR CONVICTIONS RESULTING FROM FRAUDULENT CHECK OR SHOPLIFTING VIOLATIONS AND TO REQUIRE THE MAGISTRATE TO SPECIFY AN AMOUNT OF RESTITUTION AT THE TIME OF SENTENCING IN THESE CASES AS AN ALTERNATIVE TO ANY IMPRISONMENT OF MORE

(R216) S. 126 -- Senators Land and Washington: AN ACT TO AMEND SECTION 9-1-1650 CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO AMOUNTS PAID AT TERMINATION OF EMPLOYMENT AND CERTAIN ELECTIONS UNDER THE STATE RETIREMENT SYSTEM SO AS TO PERMIT AN ACTIVE CONTRIBUTING MEMBER TO NAME CONTINGENT BENEFICIARIES; TO AMEND SECTION 9-8-110 RELATING TO PAYMENTS ON THE DEATH OF A MEMBER OR BENEFICIARY OF THE RETIREMENT SYSTEM FOR JUDGES AND SOLICITORS, SO AS TO PERMIT AN ACTIVE CONTRIBUTING MEMBER TO NAME SECONDARY BENEFICIARIES AND TO DELETE THE PROVISION

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