204

LAWS OF MARYLAND

[Ch. 49

prior to that date unless ordered to stop payment by a
person claiming an interest in the account.

4-406. Customer's duty to discover and report
unauthorized signature or alteration.

(1) When a bank sends to its customer a statement
of account accompanied by items paid in good faith in
support of the debit entries or holds the statement and
items pursuant to a request or instructions of its
customer or otherwise in a reasonable manner makes the
statement and items available to the customer, the
customer must exercise reasonable care and promptness to
examine the statement and items to discover his
unauthorized signature or any alteration on an item and
must notify the bank promptly after discovery thereof.

(2) If the bank establishes that the customer
failed with respect to an item to comply with the duties
imposed on the customer by subsection (1) the customer is
precluded from asserting against the bank

(a)     His unauthorized signature or any
alteration on the item if the bank also establishes that
it suffered a loss by reason of such failure; and

(b)    An unauthorized signature or alteration
by the same wrongdoer on any other item paid in good
faith by the bank after the first item and statement was
available to the customer for a reasonable period not
exceeding fourteen calendar days and before the bank
receives notification from the customer of any such
unauthorized signature or alteration.

(3)    The preclusion under subsection (2) does not
apply if the customer establishes lack of ordinary care
on the part of the bank in paying the item.

(4)    Without regard to care or lack of care of
either the customer or the bank a customer who does not
within one year from the time the statement and items are
made available to the customer (subsection (1)) discover
and report his unauthorized signature or any alteration
on the face or back of the item or does not within three
years from that time discover and report any unauthorized
indorsement is precluded from asserting against the bank
such unauthorized signature or indorsement or such
alteration.

(5)   If under this section a payor bank has a valid
defense against a claim of a customer upon or resulting
from payment of an item and waives or fails upon request
to assert the defense the bank may not assert against any
collecting bank or other prior party presenting or