§ 4203 Bank Transfer Instructions Liability

• •Only the transferor (the one who gave the bank the collection right) can give instructions that affect the bank.
• •The bank isn’t liable to earlier parties for actions it takes based on those instructions.
• •If the bank follows the transferor’s directions or its agreement, it’s protected from blame.

A small business hires a bank to collect payments from its customers. The business tells the bank to stop collecting from one customer who already paid.

Because the business (the transferor) gave the instruction, the bank can follow it and won’t be blamed if the customer later complains, since the bank was just doing what the business told it to do.