Legal Seminar, Chicago, IL

Liability in Chavez

 Bank liable for $329,000 that was transferred  Bank and customer did not agree on a commercially reasonable security procedure  “‘Agreement’, as distinguished from ‘contract’, means the bargain of the parties . . . as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1-303 . ” UCC § 1-201  In Chavez : “The bank ‘may use, in addition to the Security Procedure selected by the Client, any other means’ to verify payment orders. This language does not show that the ‘any other means’ is a security procedure.”

Chelan Cty. Wash. v. Bank of Am. Corp. , (E.D. Wash. 2015)

 “Commercial reasonableness of a security procedure is a question of law . . . .

 Without a resolution of the preliminary factual inquiry of what security procedures were agreed- upon, the Court cannot evaluate the commercial reasonableness of the overall agreed-upon security framework