I. WRONGFUL DISHONOR
The drawee bank is under the duty to pay its customers’ checks that are properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft.
Failure to pay properly payable check makes the bank liable for damages flowing from wrongful dishonor. For wrongful dishonor, the bank is liable for actual damages proved and may include damages for arrest or prosecution of the customer or other consequential damages (See, U.C.C. § 4-402).
A payor bank’s determination of the customer’s account balance on which a decision to dishonor for insufficiency of available funds is based may be made at any time between the time that the item is received by the payor bank and the time that the payor bank returns the item or gives notice in lieu of return, and no more than one determination need be made. If, at the election of the payor bank, a subsequent balance determination is made for the purpose of reevaluation the bank’s decision to dishonor the item, the account balance at the time is determinative of whether a dishonor for insufficiency of available funds is wrongful.
II. WHAT IS NOT WRONGFUL DISHONOR
Wrongful dishonor does not include situations involving: