## Facts

- National Title Insurance Corporation Agency maintained an escrow checking account at First Union National Bank under a written deposit agreement for non-personal accounts.
- The deposit agreement required National Title to examine account statements and report unauthorized signatures, endorsements, or alterations within 60 days of the mailing date of the earliest statement describing the item; otherwise, the bank would not be liable for paying such items.
- First Union paid two counterfeit checks bearing unauthorized signatures that were charged to National Title’s account.
- The first counterfeit check was paid in November 1998 and appeared on a statement mailed December 5, 1998.
- The second counterfeit check was paid in December 1998 and appeared on a statement mailed January 5, 1999.
- National Title did not notify First Union of the unauthorized signatures within 60 days of either statement’s mailing date.
- First Union refused to recredit the account based on the agreement’s 60-day notice provision.
- National Title sued to recover the amounts paid on the counterfeit checks.

## Issues

1. Whether a bank and its customer may, by agreement under Virginia Code § 8.4-103(a), shorten the one-year notice period in Virginia Code § 8.4-406(f) for reporting unauthorized signatures or alterations shown on account statements.
2. Whether a 60-day notice requirement for reporting unauthorized signatures is enforceable as not “manifestly unreasonable” and not an improper disclaimer of the bank’s duties.

## Decision

- The Supreme Court of Virginia affirmed summary judgment for First Union.
- The court held that § 8.4-103(a) permits parties to vary Article 4 provisions by agreement, including shortening the one-year notice period in § 8.4-406(f).
- The court concluded the 60-day notice provision was enforceable because it was not manifestly unreasonable and did not disclaim the bank’s duties of good faith or ordinary care.
- Because National Title failed to give notice within the agreed 60-day period, it was barred by contract from recovering the losses on the counterfeit checks.

## Legal Principles

- Under Virginia Code § 8.4-103(a), parties may vary the effect of Article 4 by agreement, but may not disclaim a bank’s responsibility for lack of good faith or failure to exercise ordinary care, or limit damages for such failures.
- The one-year notice period in Virginia Code § 8.4-406(f) functions as a statutory notice requirement that can be modified by agreement when consistent with § 8.4-103(a).
- A contractual notice period requiring a commercial customer to report unauthorized signatures within 60 days of the mailing of the earliest statement describing the item is valid if not manifestly unreasonable.
- A customer’s failure to comply with an enforceable contractual notice requirement can preclude claims seeking recrediting for unauthorized items.

## Conclusion

The court upheld a deposit agreement clause requiring notice of unauthorized signatures within 60 days, ruling that Article 4 allows contractual shortening of § 8.4-406(f)’s one-year period so long as the agreement does not waive the bank’s good-faith and ordinary-care duties and the shortened period is not manifestly unreasonable.


National Title Ins. Corp. Agency v. First Union Nat'l Bank, 263 Va. 355, 559 S.E.2d 668 (Va. 2002)