What Does Countermand Mean?
Countermand means to cancel, revoke, or reverse an order that has been previously issued. In this way it is used as a verb. As a noun, it refers to the order given that is contrary to the previous order. In the financial world, countermand is usually applicable to payments; it means a customer of a bank or financial institution revoking instructions to pay, or stopping payment to another party. It can happen when a payer stops payment on a check or stops/reverses a transfer of funds. Countermand of payment by the customer then ends the legal duty of the bank or institution to make the payment to the party, as originally specified by the customer.
Key Takeaways
- Countermand means to cancel, revoke, or reverse an order that has previously been issued.
- In the context of the finance industry, it refers to stopping a payment order that has previously been issued.
- Countermanding an international funds transfer order depends on whether the payment has been completed and on the technology platform used.
Understanding a Countermand
In finance, countermand is usually used in the context of stopping a payment. In the case of check payments, a customer can countermand the payment at any time before the check is presented, through a stop-payment order. Where electronic fund transfers are concerned, if the funds have not yet been transferred, a countermand order would cancel the original funds transfer order. If the funds have already been transferred, the financial institution would commence the process to reverse the funds transfer.
Countermanding an international funds transfer is more complicated than a domestic funds transfer. The countermand operation depends on whether the funds transfer is revocable or irrevocable. Furthermore, it also depends on whether a payment can be said to have been completed such that the customer cannot revoke the order. In the latter context, technology plays an important role. For example, the Federal Reserve's Clearing House Interbank Payments System (CHIPS) was deemed to be an irrevocable form of funds transfer by the courts in Delbrueck & Co. v. Manufacturers Hanover Trust Company in 1979. As such, a countermand operation may not be effective in stopping a funds transfer for such cases.
