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Information > Financial Terms > This page Negotiable Instruments Law
(continue) Article
4 Bank Deposits and Collections
Part
7 General Provisions and Definitions
Section
4101. Short Title. This
Article shall be known and may be cited as Uniform Commercial Code - Bank
Deposits and Collections. Section
4-102. Applicability. (1)
To the extent that items within this Article are also within the
scope of Articles 3 and 8, they are subject to the provisions of those
Articles. In the event of
conflict the provisions of this Article govern those of Article 3, but
the provisions of Article 8 govern those of this Article. (2)
The liability of a bank for action or non-action with respect to
any item handled by it for purposes of presentment, payment or collection
is governed by the law of the place where the bank is located.
In the case of action or non-action by or at a branch or separate
office of a bank, its liability is governed by the law of the place where
the branch or separate office is located. Section
4-103. Variation by
Agreement; Measure of Damages; Certain Action Constituting Ordinary Care. (1)
The effect of the provisions of this Article may be varied by agreement
except that no agreement can disclaim a bank's responsibility for its
own lack of good faith or failure to exercise ordinary care or can limit
the measure of damages for such lack or failure; but the parties may by
agreement determine the standards by which such responsibility is to be
measured if such standards are not manifestly unreasonable. (2)
Federal Reserve regulations and operating letters, clearing house
rules and the like have the effect of agreements under subsection (1),
whether or not specifically assented to by all parties interested in items
handled. (3)
Action or non-action approved by this Article or pursuant to Federal
Reserve regulations or operating letters constitutes the exercise of ordinary
care and, in the absence of special instructions, action or non-action
consistent with clearing house rules and the like or with a general banking
usage not disapproved by this Article, prima facie constitutes the exercise
of ordinary care. (4)
The specification or approval of certain procedures by this article
does not constitute disapproval of other procedures which may be reasonable
under the circumstances. (5)
The measure of damages for failure to exercise ordinary care in
amount which could not have been realized by the use of ordinary care,
and where there is bad faith it includes other damages, if any, suffered
by the party as a proximate consequence. Section
4-104. Definitions and
Index of Definitions. (1)
In this Article unless the context otherwise requires (a)
"Account" means any account with a bank
and includes a checking, time, interest or savings account; (b)
"Afternoon" means the period of a day
between (c) "Banking
day" means that part of any day on which a bank is open to the public
for carrying on substantially all of its banking functions; (d) "Clearing
House" means any association of banks or other payors regularly clearing
items; (e)
"Customer" means any person having an
account with a bank or for whom a bank has agreed to collect items and
includes a bank carrying an account with another bank (f) "Documentary
draft" means any negotiable or non-negotiable draft with accompanying
documents, securities or other papers to be delivered against honor of
the draft; (g)
"Item" means any instrument for the payment
of money even though it is not negotiable but does not include money; (h) "Midnight
deadline" with respect to a bank is midnight on its next banking day following
the banking day on which it receives the relevant item or notice or from
which the time for taking action commences to run, whichever is later; (i) "properly
payable" includes the availability of funds for payment at the time of
decision to pay or dishonor; (j) "Settle"
means to pay in cash, by clearing house settlement, in a charge or credit
or by remittance, or otherwise as instructed.
A settlement may be either provisional or final; (k) "Suspends
payments" with respect to a bank means that it has been closed by order
of the supervisory authorities, that a public officer has been appointed
to take it over or that it ceases or refuses to make payments in the ordinary
course of business. (2)
Other definitions applying to this Article and the sections in
which they appear are "Collecting
bank." Section 4-105. "Depositary
bank." Section 4-105. "Intermediary
bank." Section 4-105. "Payor
bank." Section 4-105. "Presenting
bank." Section 4-105. "Remitting
bank." Section 4-105. (3)
The following definitions in other Articles apply to this Article: "Acceptance."
Section 3-410. "Certificate
of deposit." Section 3-104. "Check."
Section 3-104. "Draft."
Section 3-104. "Holder
in due course." Section 3-302. "Notice
of dishonor." Section 3-508. "Presentment."
Section 3-504. "Protest."
Section 3-509. "Secondary
party." Section 3-102. (4)
In addition Article I contains general definitions and principles
of construction and interpretation applicable throughout this Article. Section
4-105. "Depositary Bank";
"Intermediary Bank"; "Collecting Bank"; "Payor Bank"; "Presenting Bank";
"Remitting Bank." In
this Article unless the context otherwise requires: (a)
"Depositary bank" means the first bank to which an item is transferred
for collection even though it is also the payor bank; (b)
"Payor bank" means a bank by which an item is payable as drawn
or accepted; (c)
""Intermediary bank" means any bank to which an item is transferred
in course of collection except the depositary or payor bank; (d)
"Collecting bank" means any bank handling the item for collection
except the payor bank; (e)
"Presenting bank" means any bank presenting an item except a payor
bank; (f)
"Remitting bank" means any payor or intermediary bank remitting
for an item. Section
4-106. Separate Office
of a Bank. A
branch or separate office of a bank (maintaining its own deposit ledgers)
is a separate bank for the purpose of computing the time within which
and determining the place at or to which action may be taken or notices
or orders shall be given under this Article and under Article 3. Note:
The words in preceding parentheses are optional. Section
4-107. Time of Receipt
of Items. (1)
For the purpose of allowing time to process items, prove balances
and make the necessary entries on its books to determine its position
for the day, a bank may fix an afternoon hour of (2)
Any item or deposit of money received on any day after a cut-off
hour so fixed or after the close of the banking day may be treated as
being received at the opening of the next banking day. Section
4-108. Delays. (1)
Unless otherwise instructed, a collecting bank in a good faith
effort to secure payment may, in the case of specific items and with or
without the approval of any person involved, waive, modify or extend time
limits imposed or permitted by this Act for a period not in excess of
an additional banking day without discharge of secondary parties and without
liability to its transferor or any prior party. (2)
Delay by a collecting bank or payor bank beyond time limits prescribed
or permitted by this Act or by instructions is excused if caused by interruption
of communication facilities, suspension of payments by another bank, war,
emergency conditions or other circumstances beyond the control of the
bank provided it exercises such diligence as the circumstances require. Section
4-109. Process of Posting. The
"process of posting" means the usual procedure followed by a payor bank
in determining to pay an item and in recording the payment including one
or more of the following or other steps as determined by the bank: (a)
verification of any signature; (b)
ascertaining that sufficient funds are
available; (c)
affixing a "paid" or other stamp; (d)
entering a charge or entry to a customer's
account; (e)
correcting or reversing an entry or erroneous
action with respect to the item. Part
2 Collection of Items:
Depositary and Collecting Banks
Section
4-201. Presumption and
Duration of Agency Status of Collecting Banks and Provisional Status of
Credits: Applicability of
Article; Item Indorsed "Pay Any Bank." (1)
Unless a contrary intent clearly appears and prior to the time
that a settlement given by a collecting bank for an item is or becomes
final (subsection (3) of Section 4-211 and Section 4-212 and 4-213) the
bank is an agent or sub-agent of the owner of the item and any settlement
given for the item is provisional.
This provision applies regardless of the form of endorsement or
lack of endorsement and even though credit given for the item is subject
to immediate withdrawal as of right or is in fact withdrawn; but the notice
of ownership of an item by its owner and any rights of the owner to proceeds
of the item are subject to rights of a collecting bank such as those resulting
from outstanding advances on the item and valid rights of setoff.
When an item is handled by banks for purposes of presentment, payment
and collection, the relevant provisions of this Article apply even though
action of parties clearly establishes that a particular bank has purchased
the item and is the owner of it. (2)
After an item has been endorsed with the word "Pay any bank" or
the like, only a bank may acquire the rights of a holder (a)
until the item has been returned to the
customer initiating collection; or (b)
until the item has been specially endorsed
by a bank to a person who is not a bank. Section
4-202. Responsibility
for Collection; When Action Seasonable. (1)
A collecting bank must use ordinary care in (a)
presenting an item or sending it for
presentment; and (b)
sending notice of dishonor or non-payment
or returning an item other than a documentary draft to the bank's transferor
or directly to the depositary bank under subsection (2) of Section 4-212
(see note to Section 4-212) after learning that the item has not
been paid or accepted, as the case may be; and (c)
settling for an item when the bank receives
final settlement; and (d)
making or providing for any necessary
protest; and (e)
notifying its transferor of any loss
or delay in transit within a reasonable time after discovery thereof. (2)
A collecting bank taking proper action before its (3)
Subject to subsection (1)(a), a bank is not liable for the insolvency,
neglect, misconduct, mistake, or default or another bank or person or
for loss or destruction of an item in transit or in the possession of
others. Section
4-203. Effect of Instructions. Subject
to the provisions of Article 3 concerning conversion of instruments (Section
3-419) and the provisions of both Article 3 and this A5rticle concerning
restrictive endorsements, only a collecting bank's transferor can give
instructions which affect the bank or constitute notice to it and a collecting
bank is not liable to prior parties for any action taken pursuant to such
instructions or in accordance with any agreement with its transferor. |