Opinion ID: 1722513
Heading Depth: 1
Heading Rank: 6

Heading: The Collecting Bank

Text: Section 4-202, U.C.C., imposes upon a collecting bank the duty to exercise ordinary care in presenting an item, in sending notice of dishonor or nonpayment, in returning an item, and in settling when the bank receives final settlement. In respect of return of an item, if a bank acts before its midnight deadline following receipt of an item, it acts seasonably. A reasonably longer time may be seasonable, but the bank has the burden of so establishing. Presentment is a demand for acceptance or payment. § 3-504, U.C.C. Acceptance may be deferred until the close of the next business day following presentment, but payment must be made in any event before the close of business on the day of presentment.  § 3-506(2), U.C.C. (Emphasis supplied.) Where acceptance is required, the acceptance must be in writing by signature of the acceptor. § 3-410(1), U.C.C. Section 4-103(5), U.C.C., makes the measure of damages the rule which is asserted by the bank, namely, the amount of the item reduced by an amount which could not have been realized by the use of ordinary care. It also provides for consequential damages proximately caused if there has been bad faith. A collecting bank which has made a provisional settlement (i. e., a settlement which is subject to revocation), but which itself fails to receive payment, may charge back the item if, by its midnight deadline or within a reasonably longer time after it learns of the facts, it returns the item or gives notice of the pertinent facts. The right to charge back terminates if and when a settlement received becomes final, § 4-212, U.C.C., because of final payment by the payor bank. § 4-213(3), U.C.C. The right to charge back must be exercised promptly. Comment 3, § 4-212, U.C.C. The code places no duty upon a collecting bank to provisionally settle for an item when it is received for collection. Uniform Commercial Code Practice Handbook (4th Ed.), Bank Deposits & Collections, Clark, Bailey & Young, p. 71. If a collecting bank receives a settlement that is or becomes final, the bank is accountable to its customer for the amount of any item and any provisional credit given becomes final. § 4-213, U.C.C. By court interpretation accountable means that it is liable for the amount of the item. Rock Island Auction Sales, Inc. v. Empire Packing Co., Inc., 32 Ill.2d 269, 204 N.E.2d 721.