Section 400.4-401

Title XXVI TRADE AND COMMERCE

Chapter 400

Effective - 28 Aug 1994   

  400.4-401.  When bank may charge customer's account. — (a)  A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft.  An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and bank.

  (b)  A bank may charge against the account of a customer a check that is otherwise properly payable from the account, even though payment was made before the date of the check, unless the customer has given notice to the bank of the postdating describing the check with reasonable certainty.  The notice is effective for the period stated in Section 400.4-403(b) for stop-payment order, and must be received at such time and in such manner as to afford the bank a reasonable opportunity to act on it before the bank takes any action with respect to the check described in Section 400.4-303.  If a bank charges against the account of a customer a check before the date stated in the notice of postdating, the bank is liable for damages for the loss resulting from its act.  The loss may include damages for dishonor of subsequent items under Section 400.4-402.

  (c)  A bank that in good faith makes payment to a holder may charge the indicated account of its customer according to:

  (1)  the original terms of the altered item; or

  (2)  the terms of the completed item, even though the bank knows the item has been completed unless the bank has notice that the completion was improper.

  (d)  No bank shall be liable for charging against its customer's account a postdated check, otherwise properly payable from such account, before the date stated thereon unless the bank has received written notice in advance from the customer that the check is postdated.  Such notice shall include the payee's name as it appeared on the check, the date, the check number and the amount of such check.

  (e)  No bank customer shall be liable for charges on a check dishonored because of insufficient funds if the bank was in error in their accounting or posting of the customer's account and the bank shall also notify, in writing, the persons affected by the bank's failure to honor such checks.

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(L. 1963 p. 503 § 4-401, A.L. 1988 H.B. 1605, A.L. 1992 S.B. 448, A.L. 1994 S.B. 701)