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What is a Beneficiary's Bank? A Comprehensive Legal Overview
Definition & Meaning
The term "beneficiary's bank" refers to the financial institution that is designated in a payment order to receive funds on behalf of a beneficiary. This is the bank where the beneficiary holds an account, and it is responsible for crediting the funds to that account as specified in the payment order. If the payment order does not specify an account, the bank is still obligated to make the payment to the beneficiary.
Table of content
Legal Use & context
In legal practice, the concept of a beneficiary's bank is primarily relevant in the context of banking and financial transactions, particularly in commercial law. It plays a crucial role in payment orders, wire transfers, and other forms of electronic payments. Understanding this term is essential for individuals and businesses involved in transactions that require the transfer of funds, as it helps clarify the responsibilities of the banks involved.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
For instance, if a company issues a payment order to transfer $1,000 to an employee's bank account at XYZ Bank, then XYZ Bank is the beneficiary's bank. The bank will credit the employee's account with the $1,000 as per the payment order.
(Hypothetical example) If a person receives a wire transfer but does not have an account at the specified bank, the bank must still ensure that the funds are delivered to the person, either by opening an account or through another method of payment.
Relevant laws & statutes
U.S. Uniform Commercial Code (UCC) Article 4A governs funds transfers and includes provisions related to beneficiary's banks. Specifically, UCC § 4A-103 defines terms related to payment orders, including the role of the beneficiary's bank.
State-by-state differences
State
Key Differences
California
Adopts UCC provisions with specific state regulations on electronic funds transfers.
New York
Has additional consumer protection laws regarding electronic payments.
Texas
Follows UCC but includes unique state guidelines for transaction disputes.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Differences
Beneficiary
The person or entity entitled to receive funds.
The beneficiary's bank is the institution handling the funds, while the beneficiary is the recipient.
Payment Order
A directive to a bank to transfer funds.
A payment order specifies the beneficiary's bank, while the order itself is the instruction for the transfer.
Common misunderstandings
What to do if this term applies to you
If you are involved in a transaction that requires a payment order, ensure that the beneficiary's bank is correctly identified in the order. If you need assistance with creating or managing payment orders, consider exploring US Legal Forms' templates for guidance. For complex transactions, seeking professional legal advice may be beneficial.
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Typical fees: Varies by bank and transaction type.
Jurisdiction: Governed by UCC Article 4A.
Possible penalties: May include disputes over unauthorized transactions.
Key takeaways
Frequently asked questions
If the beneficiary's bank is incorrect, the payment may be delayed or not processed at all. Itâs crucial to verify the bank details before submitting a payment order.
Generally, once a payment order is submitted, changes may not be possible. You should contact the bank immediately for assistance.
The bank must still ensure that the funds are delivered to the beneficiary through alternative means.