(810 ILCS 5/4-406)
(from Ch. 26, par. 4-406)
Customer's duty to discover and report unauthorized signature
(a) A bank that sends or makes available to a customer a statement of
account showing payment of items for the account shall either return or
make available to the customer the items paid or provide information in the
statement of account sufficient to allow the customer to identify the items
paid. The statement of account provides sufficient information if the item
is described by item number, amount, and date of payment.
(b) If the items are not returned to the customer, the person retaining
the items shall either retain the items or, if the items are destroyed,
maintain the capacity to furnish legible copies of the items until the
expiration of 7 years after receipt of the items. A customer may
request an item from the bank that paid the item, and that bank must
provide in a reasonable time either the item or, if the item has been
destroyed or is not otherwise obtainable, a legible copy of the item.
(c) If a bank sends or makes available a statement of account or items
pursuant to subsection (a), the customer must exercise reasonable
promptness in examining the statement or the items to determine whether
any payment was not authorized because of an alteration of an item or
because a purported signature by or on behalf of the customer was not
authorized. If, based on the statement or items provided, the customer
should reasonably have discovered the unauthorized payment, the customer
must promptly notify the bank of the relevant facts.
(d) If the bank proves that the customer failed, with respect to an
item, to comply with the duties imposed on the customer by subsection (c),
the customer is precluded from asserting against the bank:
(1) the customer's unauthorized signature or any
alteration on the item, if the bank also proves that it suffered a loss by reason of the failure; and
(2) the customer's unauthorized signature or
alteration by the same wrongdoer on any other item paid in good faith by the bank if the payment was made before the bank received notice from the customer of the unauthorized signature or alteration and after the customer had been afforded a reasonable period of time, not exceeding 30 days, in which to examine the item or statement of account and notify the bank.
(e) If subsection (d) applies and the customer proves that the bank
failed to exercise ordinary care in paying the item and that the failure
substantially contributed to loss, the loss is allocated between the
customer precluded and the bank asserting the preclusion according to the
extent to which the failure of the customer to comply with subsection (c)
and the failure of the bank to exercise ordinary care contributed
to the loss. If the customer proves that the bank did not pay the item in
good faith, the preclusion under subsection (d) does not apply.
(f) Without regard to care or lack of care of either the customer or the
bank, a customer who does not within one year after the statement
or items are made available to the customer (subsection (a)) discover and
report the customer's unauthorized signature on or any alteration on
the item is precluded
from asserting against the bank the unauthorized signature or alteration.
If there is a preclusion under this subsection, the payor bank may not
recover for breach of warranty under Section 4-208 with respect to the
unauthorized signature or alteration to which the preclusion applies.
(Source: P.A. 87-582; 87-1135.)