Opinion ID: 1722513
Heading Depth: 1
Heading Rank: 7

Heading: The Payor Bank

Text: A payor bank may charge its customer's account for any item which is properly payable even though the charge may create an overdraft. § 4-401(1), U.C.C. A payor bank is liable to its customer for damages proximately caused by a wrongful dishonor. § 4-402, U.C.C. With respect to items payable on demand, the payor bank's duty to settle or to return the item is governed by section 4-302, U.C.C. It requires the payor bank to settle for the item provisionally by midnight of the day of receipt, or become accountable for the amount unless it returns the item on that day. However, if it has made timely provisional settlement, it may revoke the provisional settlement up until its midnight deadline, that is, midnight on the day following. § 4-301, U.C.C. This section assumes that final payment has not been made under section 4-213(1), U.C.C. If it has, then section 4-301, U.C.C., has no application. See Comment 5, § 4-301, U.C.C. A payor bank has finally paid an item whenever it has settled for the item without reserving a right to revoke and without having that right under statute, clearing house rule, or agreement, or has completed the process of posting to the indicated account of the drawer, maker, or other person to be charged therewith, or where it has made a provisional settlement and failed to revoke the settlement in the time and manner permitted by statute, clearing house rule, or agreement. § 4-213(1), U.C.C. Upon such final payment it is accountable. Rock Island Auction Sales, Inc. v. Empire Packing Co., Inc., supra . A payor bank's right to exercise a setoff comes too late if it is exercised after the bank has accepted or completed the process of posting to the indicated account of the drawer, maker, or otherwise has evidenced by examination of such indicated account and by action its decision to pay the item, or after it has become accountable for the late return of the item by reason of the provisions of sections 4-213(1)(d) and 4-302, U.C.C. § 4-303(1), U.C.C.