Lloyd's Maritime and Commercial Law Quarterly
THE TIME OF PAYMENT IN PAPER-BASED AND ELECTRONIC FUNDS TRANSFER SYSTEMS
Johanna Vroegop*
Introduction
It is easy to assume that uncertainty as to the time at which payment takes place has been caused by the introduction of electronic funds transfer systems. As Professor Goode has commented:1 “there is a tendency to ascribe to new technology some magical quality taking it altogether beyond the plane of established legal principle”. In fact, uncertainty as to the time of payment exists in both paper-based and electronic funds transfer systems. This is not to say that the advent of electronic banking has not brought about major changes. It has increased the range of payment systems available, since paper-based systems are still in common use, and the decreased cost and increased ease of transferring funds brought about by electronics means that more funds transfers are carried out, particularly by companies taking advantage of cash management services provided by banks to move funds to the most profitable location.2 Another way in which electronic banking has had an impact is that the advent of new payment systems has inevitably raised questions as to their legal implications and what would be appropriate rules for regulating the rights and liabilities of those involved in such transactions,3 whereas the uncertainties which linger in traditional payment systems generally go unnoticed.
Determining the time of payment will, of course, become important in only a small number of funds transfer transactions. Examples are: where the payer wishes to revoke a payment instruction; where the death, winding up, liquidation or bankruptcy of the payer terminates the bank’s authority to pay; where the contract between payer and payee requires payment to be made strictly on the due date; where it is necessary to determine the time of payment for taxation purposes, or on the sale of book debts; or where there is a failure of one of the banks involved. In view of the multiplicity of payment systems available and the increasing use being
* Dept. of Commercial Law, University of Auckland.
1. Electronic Banking (1985), 15.
2. United Nations Commission on International Trade Law, UNCITRAL Legal Guide on Electronic Funds Transfer, Chap. IV: “Finality of Funds Transfer” (1987) (hereafter UNCITRAL Guide), para. 48; Chorofas, Electronic Funds Transfer (1988), Chap. IV; Kirkman, Electronic Funds Transfer Systems (1987), Chap. 15; Revell, Banking and Electronic Fund Transfers (1983), 53–56.
3. At the international level both the United Nations (UNCITRAL Guide) and the Organization for Economic Co-operation and Development (Revell, supra, fn. 1) have commissioned reports. At the national level there has been mainly a concern with consumer protection, as evidenced by the United States Electronic Fund Transfer Act 1978, the Australian Recommended Procedures to Govern the Relationship between Users and Providers of Electronic Funds Transfer Systems (1986) and the New Zealand Code of Practice to cover the Issue and Use of Electronic Funds Transfer Cards within New Zealand (1987).
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