Check Fraud and the Variation of Section 4-401: Why Banks Should Not Be Able to Vary the Ucc’s Standard Risk Allocation Scheme

Uniform Commercial Code Article 4 governs both a bank’s duties in collecting checks for payment as well as its duties to its depositors. Section 4-401 provides that a bank can charge an item to a customer’s account only if it is properly payable. For an item to be properly payable, it must be authorized by the customer. This Note examines the 2010 case, Cincinnati Insurance Co. v. Wachovia Bank, in which the U.S. District Court for the District of Minnesota stated that a bank can vary section 4-401’s default rule by including negotiated provisions in the deposit agreement. After exploring the structure and history of Article 4, this Note argues that banks should not be able to vary section 4-401’s default rule, and proposes that courts take into account the history of Article 4 when analyzing which default rules banks can vary through deposit provisions.