BUSINESS & COMMERCE CODE
CHAPTER 4. BANK DEPOSITS AND COLLECTIONS
SUBCHAPTER A. GENERAL PROVISIONS AND DEFINITIONS
§ 4.101. SHORT TITLE. This chapter may be cited as
Uniform Commercial Code--Bank Deposits and Collections.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.102. APPLICABILITY. (a) To the extent that items
within this chapter are also within Chapters 3 and 8, they are
subject to those chapters. If there is conflict, this chapter
governs Chapter 3, but Chapter 8 governs this chapter.
(b) The liability of a bank for action or non-action with
respect to an 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.
(c) Notwithstanding Section 1.301, the laws of this state
govern a deposit contract between a bank and a consumer account
holder if the branch or separate office of the bank that accepts the
deposit contract is located in this state. For purposes of this
subsection, "consumer account holder" means a natural person who
holds a deposit account primarily for personal, family, or
household purposes but does not include a natural person who holds
an account for another in a professional capacity.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996;
Acts 1999, 76th Leg., ch. 344, § 5.001, eff. Sept. 1, 1999; Acts
2003, 78th Leg., ch. 542, § 11, eff. Sept. 1, 2003.
§ 4.103. VARIATION BY AGREEMENT; MEASURE OF DAMAGES;
ACTION CONSTITUTING ORDINARY CARE. (a) The effect of the
provisions of this chapter may be varied by agreement, but the
parties to the agreement cannot disclaim a bank's responsibility
for its lack of good faith or failure to exercise ordinary care or
limit the measure of damages for the lack or failure. However, the
parties may determine by agreement the standards by which the
bank's responsibility is to be measured if those standards are not
manifestly unreasonable.
(b) Federal Reserve regulations and operating circulars,
clearing-house rules, and the like have the effect of agreements
under Subsection (a), whether or not specifically assented to by
all parties interested in items handled.
(c) Action or non-action approved by this chapter or
pursuant to Federal Reserve regulations or operating circulars is
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 chapter, is prima facie the exercise of ordinary care.
(d) The specification or approval of certain procedures by
this chapter is not disapproval of other procedures that may be
reasonable under the circumstances.
(e) The measure of damages for failure to exercise ordinary
care in handling an item is the amount of the item reduced by an
amount that could not have been realized by the exercise of ordinary
care. If there is also bad faith, it includes any other damages the
party suffered as a proximate consequence.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.104. DEFINITIONS AND INDEX OF DEFINITIONS. (a) In
this chapter, unless the context otherwise requires:
(1) "Account" means any deposit or credit account with
a bank, including a demand, time, savings, passbook, share draft,
or like account, other than an account evidenced by a certificate of
deposit.
(2) "Afternoon" means the period of a day between noon
and midnight.
(3) "Banking day" means the part of a day on which a
bank is open to the public for carrying on substantially all of its
banking functions.
(4) "Clearing house" means an association of banks or
other payors regularly clearing items.
(5) "Customer" means a person having an account with a
bank or for whom a bank has agreed to collect items, including a
bank that maintains an account at another bank.
(6) "Documentary draft" means a draft to be presented
for acceptance or payment if specified documents, certificated
securities (Section 8.102) or instructions for uncertificated
securities (Section 8.102), or other certificates, statements, or
the like are to be received by the drawee or other payor before
acceptance or payment of the draft.
(7) "Draft" means a draft as defined in Section 3.104
or an item, other than an instrument, that is an order.
(8) "Drawee" means a person ordered in a draft to make
payment.
(9) "Item" means an instrument or a promise or order to
pay money handled by a bank for collection or payment. The term
does not include a payment order governed by Chapter 4A or a credit
or debit card slip.
(10) "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.
(11) "Settle" means to pay in cash, by clearing-house
settlement, in a charge or credit or by remittance, or otherwise as
agreed. A settlement may be either provisional or final.
(12) "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.
(b) Other definitions applying to this chapter and the
sections in which they appear are:"Agreement for electronic presentment" Section 4.110.
"Bank" Section 4.105.
"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.
"Presentment notice" Section 4.110.
(c) The following definitions in other chapters apply to
this chapter: "Acceptance" Section 3.409.
"Alteration" Section 3.407.
"Cashier's check" Section 3.104.
"Certificate of deposit" Section 3.104.
"Certified check" Section 3.409.
"Check" Section 3.104.
"Holder in due course" Section 3.302.
"Instrument" Section 3.104.
"Notice of dishonor" Section 3.503.
"Order" Section 3.103.
"Ordinary care" Section 3.103.
"Person entitled to enforce" Section 3.301.
"Presentment" Section 3.501.
"Promise" Section 3.103.
"Prove" Section 3.103.
"Teller's check" Section 3.104.
"Unauthorized signature" Section 3.403.
(d) In addition, Chapter 1 contains general definitions and
principles of construction and interpretation applicable
throughout this chapter.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996;
Acts 1995, 74th Leg., ch. 962, § 18, eff. Sept. 1, 1995; Acts
2003, 78th Leg., ch. 542, § 12, eff. Sept. 1, 2003.
§ 4.105. "BANK"; "DEPOSITARY BANK"; "INTERMEDIARY
BANK"; "COLLECTING BANK"; "PAYOR BANK"; "PRESENTING BANK". In
this chapter:
(1) "Bank" means a person engaged in the business of
banking, including a savings bank, savings and loan association,
credit union, or trust company.
(2) "Depositary bank" means the first bank to take an
item even though it is also the payor bank, unless the item is
presented for immediate payment over the counter.
(3) "Payor bank" means a bank that is the drawee of a
draft.
(4) "Intermediary bank" means a bank to which an item
is transferred in course of collection except the depositary or
payor bank.
(5) "Collecting bank" means a bank handling an item
for collection except the payor bank.
(6) "Presenting bank" means a bank presenting an item
except a payor bank.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.106. PAYABLE THROUGH OR PAYABLE AT BANK; COLLECTING
BANK. (a) If an item states that it is "payable through" a bank
identified in the item, the item:
(1) designates the bank as a collecting bank and does
not by itself authorize the bank to pay the item; and
(2) may be presented for payment only by or through the
bank.
(b) If an item states that it is "payable at" a bank
identified in the item, the item is equivalent to a draft drawn on
the bank.
(c) If a draft names a nonbank drawee and it is unclear
whether a bank named in the draft is a co-drawee or a collecting
bank, the bank is a collecting bank.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.107. SEPARATE OFFICE OF A BANK. A branch or
separate office of a bank 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 must be given under
this chapter and under Chapter 3.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Renumbered from § 4.106 and amended by Acts 1995, 74th Leg., ch.
921, § 4, eff. Jan. 1, 1996.
§ 4.108. TIME OF RECEIPT OF ITEMS. (a) 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 two P.M. or later as a
cutoff hour for the handling of money and items and the making of
entries on its books.
(b) An item or deposit of money received on any day after a
cutoff 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.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Renumbered from § 4.107 and amended by Acts 1995, 74th Leg., ch.
921, § 4, eff. Jan. 1, 1996.
§ 4.109. DELAYS. (a) Unless otherwise instructed, a
collecting bank in a good faith effort to secure payment of a
specific item drawn on a payor other than a bank, and with or
without the approval of any person involved, may waive, modify, or
extend time limits imposed or permitted by this title for a period
not exceeding two additional banking days without discharge of
drawers or indorsers or liability to its transferor or a prior
party.
(b) Delay by a collecting bank or payor bank beyond time
limits prescribed or permitted by this title or by instructions is
excused if:
(1) the delay is caused by interruption of
communication or computer facilities, suspension of payments by
another bank, war, emergency conditions, failure of equipment, or
other circumstances beyond the control of the bank; and
(2) the bank exercises such diligence as the
circumstances require.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Renumbered from § 4.108 and amended by Acts 1995, 74th Leg., ch.
921, § 4, eff. Jan. 1, 1996.
§ 4.110. ELECTRONIC PRESENTMENT. (a) "Agreement for
electronic presentment" means an agreement, clearing-house rule,
or Federal Reserve regulation or operating circular providing that
presentment of an item may be made by transmission of an image of an
item or information describing the item ("presentment notice")
rather than delivery of the item itself. The agreement may provide
for procedures governing retention, presentment, payment,
dishonor, and other matters concerning items subject to the
agreement.
(b) Presentment of an item under an agreement for
presentment is made when the presentment notice is received.
(c) If presentment is made by presentment notice, a
reference to "item" or "check" in this chapter means the
presentment notice unless the context otherwise indicates.
Added by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.111. STATUTE OF LIMITATIONS. An action to enforce
an obligation, duty, or right arising under this chapter must be
commenced within three years after the cause of action accrues.
Added by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.112. PAYMENT OF CHECK AT PAR. (a) Except as
otherwise provided by Chapter 3 or this chapter, a payor bank shall
pay a check drawn on it against an account with a sufficient balance
at par without regard to whether the payee holds an account at the
bank.
(b) This section does not prohibit a bank from requiring
commercially reasonable verification of the payee's identity
before settlement of the check.
(c) In addition to any remedy provided by law, the banking
commissioner, in coordination with the Finance Commission of Texas,
shall ensure that payor banks comply with the requirements of this
section.
Added by Acts 2001, 77th Leg., ch. 699, § 20, eff. Sept. 1, 2001.
SUBCHAPTER B. COLLECTION OF ITEMS: DEPOSITARY AND COLLECTING BANKS
§ 4.201. STATUS OF COLLECTING BANK AS AGENT AND
PROVISIONAL STATUS OF CREDITS; APPLICABILITY OF CHAPTER; ITEM
INDORSED "PAY ANY BANK". (a) Unless a contrary intent clearly
appears and before the time that a settlement given by a collecting
bank for an item is or becomes final, the bank, with respect to the
item, 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 indorsement or lack of
indorsement and even though credit given for the item is subject to
immediate withdrawal as of right or is in fact withdrawn; but the
continuance 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 rights of recoupment or setoff. If an item is
handled by banks for purposes of presentment, payment, collection,
or return, the relevant provisions of this chapter apply even
though action of the parties clearly establishes that a particular
bank has purchased the item and is the owner of it.
(b) After an item has been indorsed with the words "pay any
bank" or the like, only a bank may acquire the rights of a holder
until the item has been:
(1) returned to the customer initiating collection;
or
(2) specially indorsed by a bank to a person who is not
a bank.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.202. RESPONSIBILITY FOR COLLECTION OR RETURN; WHEN
ACTION TIMELY. (a) A collecting bank must exercise ordinary care
in:
(1) presenting an item or sending it for presentment;
(2) sending notice of dishonor or non-payment or
returning an item other than a documentary draft to the bank's
transferor after learning that the item has not been paid or
accepted, as the case may be;
(3) settling for an item when the bank receives final
settlement; and
(4) notifying its transferor of any loss or delay in
transit within a reasonable time after discovery thereof.
(b) A collecting bank exercises ordinary care under
Subsection (a) by taking proper action before its midnight deadline
following receipt of an item, notice, or settlement. Taking proper
action within a reasonably longer time may constitute the exercise
of ordinary care, but the bank has the burden of establishing
timeliness.
(c) Subject to Subsection (a)(1), a bank is not liable for
the insolvency, neglect, misconduct, mistake, or default of another
bank or person or for loss or destruction of an item in the
possession of others or in transit.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.203. EFFECT OF INSTRUCTIONS. Subject to Chapter 3
concerning conversion of instruments (Section 3.420) and
restrictive indorsements (Section 3.206), only a collecting bank's
transferor can give instructions that affect the bank or constitute
notice to it, and a collecting bank is not liable to prior parties
for any action taken pursuant to the instructions or in accordance
with any agreement with its transferor.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.204. METHODS OF SENDING AND PRESENTING; SENDING
DIRECTLY TO PAYOR BANK. (a) A collecting bank shall send items by
a reasonably prompt method, taking into consideration relevant
instructions, the nature of the item, the number of those items on
hand, the cost of collection involved, and the method generally
used by it or others to present those items.
(b) A collecting bank may send:
(1) an item directly to the payor bank;
(2) an item to a non-bank payor if authorized by its
transferor; and
(3) an item other than a documentary draft to a
non-bank payor, if authorized by Federal Reserve regulation or
operating circular, clearing-house rule, or the like.
(c) Presentment may be made by a presenting bank at a place
where the payor bank or other payor has requested that presentment
be made.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.205. DEPOSITORY BANK HOLDER OF UNINDORSED ITEM. If
a customer delivers an item to a depositary bank for collection, the
depositary bank:
(1) becomes a holder of the item at the time it
receives the item for collection if the customer at the time of
delivery was a holder of the item, whether or not the customer
indorses the item, and, if the bank satisfies the other
requirements of Section 3.302, the bank is a holder in due course;
and
(2) warrants to collecting banks, the payor bank or
other payor, and the drawer that the amount of the item was paid to
the customer or deposited to the customer's account.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.206. TRANSFER BETWEEN BANKS. Any agreed method that
identifies the transferor bank is sufficient for the item's further
transfer to another bank.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.207. TRANSFER WARRANTIES. (a) A customer or
collecting bank that transfers an item and receives a settlement or
other consideration warrants to the transferee and to any
subsequent collecting bank that:
(1) the warrantor is a person entitled to enforce the
item;
(2) all signatures on the item are authentic and
authorized;
(3) the item has not been altered;
(4) the item is not subject to a defense or claim in
recoupment (Section 3.305(a)) of any party that can be asserted
against the warrantor;
(5) the warrantor has no knowledge of any insolvency
proceeding commenced with respect to the maker or acceptor or, in
the case of an unaccepted draft, the drawer; and
(6) if the item is a demand draft, the creation of the
item according to the terms on its face was authorized by the person
identified as drawer.
(b) If an item is dishonored, a customer or collecting bank
transferring the item and receiving settlement or other
consideration is obliged to pay the amount due on the item (i)
according to the terms of the item at the time it was transferred,
or (ii) if the transfer was of an incomplete item, according to its
terms when completed as stated in Sections 3.115 and 3.407. The
obligation of a transferor is owed to the transferee and to any
subsequent collecting bank that takes the item in good faith. A
transferor cannot disclaim its obligation under this subsection by
an indorsement stating that it is made "without recourse" or
otherwise disclaiming liability.
(c) A person to whom the warranties under Subsection (a) are
made and who took the item in good faith may recover from the
warrantor as damages for breach of warranty an amount equal to the
loss suffered as a result of the breach, but not more than the
amount of the item plus expenses and loss of interest incurred as a
result of the breach.
(d) The warranties stated in Subsection (a) cannot be
disclaimed with respect to checks. Unless notice of a claim for
breach of warranty is given to the warrantor within 30 days after
the claimant has reason to know of the breach and the identity of
the warrantor, the warrantor is discharged to the extent of any loss
caused by the delay in giving notice of the claim.
(e) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the breach.
(f) If the warranty under Subsection (a)(6) is not given by
a transferor or collecting bank under applicable conflict of law
rules, the warranty is not given to that transferor when that
transferor is a transferee or to any prior collecting bank of that
transferee.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996;
Acts 1997, 75th Leg., ch. 131, § 5, eff. Sept. 1, 1997.
§ 4.208. PRESENTMENT WARRANTIES. (a) If an unaccepted
draft is presented to the drawee for payment or acceptance and the
drawee pays or accepts the draft, (i) the person obtaining payment
or acceptance, at the time of presentment, and (ii) a previous
transferor of the draft, at the time of transfer, warrant to the
drawee that pays or accepts the draft in good faith that:
(1) the warrantor is, or was, at the time the warrantor
transferred the draft, a person entitled to enforce the draft or
authorized to obtain payment or acceptance of the draft on behalf of
a person entitled to enforce the draft;
(2) the draft has not been altered;
(3) the warrantor has no knowledge that the signature
of the purported drawer of the draft is unauthorized; and
(4) if the instrument is a demand draft, the creation
of the draft according to the terms on its face was authorized by
the person identified as drawer.
(b) A drawee making payment may recover from a warrantor
damages for breach of warranty equal to the amount paid by the
drawee less the amount the drawee received or is entitled to receive
from the drawer because of the payment. In addition, the drawee is
entitled to compensation for expenses and loss of interest
resulting from the breach. The right of the drawee to recover
damages under this subsection is not affected by any failure of the
drawee to exercise ordinary care in making payment. If the drawee
accepts the draft, breach of warranty is a defense to the obligation
of the acceptor. If the acceptor makes payment with respect to the
draft, the acceptor is entitled to recover from a warrantor for
breach of warranty the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty under
Subsection (a) based on an unauthorized indorsement of the draft or
an alteration of the draft, the warrantor may defend by proving that
the indorsement is effective under Section 3.404 or 3.405 or the
drawer is precluded under Section 3.406 or 4.406 from asserting
against the drawee the unauthorized indorsement or alteration.
(d) If (i) a dishonored draft is presented for payment to
the drawer or an indorser, or (ii) any other item is presented for
payment to a party obliged to pay the item, and the item is paid, the
person obtaining payment and a prior transferor of the item warrant
to the person making payment in good faith that the warrantor is, or
was, at the time the warrantor transferred the item, a person
entitled to enforce the item or authorized to obtain payment on
behalf of a person entitled to enforce the item. The person making
payment may recover from any warrantor for breach of warranty an
amount equal to the amount paid plus expenses and loss of interest
resulting from the breach.
(e) The warranties stated in Subsections (a) and (d) cannot
be disclaimed with respect to checks. Unless notice of a claim for
breach of warranty is given to the warrantor within 30 days after
the claimant has reason to know of the breach and the identity of
the warrantor, the warrantor is discharged to the extent of any loss
caused by the delay in giving notice of the claim.
(f) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the breach.
(g) If the warranty under Subsection (a)(4) is not given by
a transferor under applicable conflict of law rules, the warranty
is not given to that transferor when that transferor is a
transferee.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996;
Acts 1997, 75th Leg., ch. 131, § 6, eff. Sept. 1, 1997.
§ 4.209. ENCODING AND RETENTION WARRANTIES. (a) A
person who encodes information on or with respect to an item after
issue warrants to any subsequent collecting bank and to the payor
bank or other payor that the information is correctly encoded. If
the customer of a depositary bank encodes, that bank also makes the
warranty.
(b) A person who undertakes to retain an item pursuant to an
agreement for electronic presentment warrants to any subsequent
collecting bank and to the payor bank or other payor that retention
and presentment of the item comply with the agreement. If a
customer of a depositary bank undertakes to retain an item, that
bank also makes this warranty.
(c) A person to whom warranties are made under this section
and who took the item in good faith may recover from the warrantor
as damages for breach of warranty an amount equal to the loss
suffered as a result of the breach, plus expenses and loss of
interest incurred as a result of the breach.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.210. SECURITY INTEREST OF COLLECTING BANK IN ITEMS,
ACCOMPANYING DOCUMENTS AND PROCEEDS. (a) A collecting bank has a
security interest in an item and any accompanying documents or the
proceeds of either:
(1) in case of an item deposited in an account, to the
extent to which credit given for the item has been withdrawn or
applied;
(2) in case of an item for which it has given credit
available for withdrawal as of right, to the extent of the credit
given, whether or not the credit is drawn upon or there is a right of
charge-back; or
(3) if it makes an advance on or against the item.
(b) If credit given for several items received at one time
or pursuant to a single agreement is withdrawn or applied in part,
the security interest remains upon all the items, any accompanying
documents, or the proceeds of either. For the purpose of this
section, credits first given are first withdrawn.
(c) Receipt by a collecting bank of a final settlement for
an item is a realization on its security interest in the item,
accompanying documents, and proceeds. So long as the bank does not
receive final settlement for the item or give up possession of the
item or accompanying documents for purposes other than collection,
the security interest continues to that extent and is subject to
Chapter 9, but:
(1) no security agreement is necessary to make the
security interest enforceable (Section 9.203(b)(3)(A) );
(2) no filing is required to perfect the security
interest; and
(3) the security interest has priority over
conflicting perfected security interests in the item, accompanying
documents, or proceeds.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Renumbered from § 4.208 and amended by Acts 1995, 74th Leg., ch.
921, § 4, eff. Jan. 1, 1996; Acts 1999, 76th Leg., ch. 414, §
2.23, eff. July 1, 2001.
§ 4.211. WHEN BANK GIVES VALUE FOR PURPOSES OF HOLDER IN
DUE COURSE. For purposes of determining its status as a holder in
due course, a bank has given value to the extent it has a security
interest in an item, if the bank otherwise complies with the
requirements of Section 3.302 on what constitutes a holder in due
course.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Renumbered from § 4.209 and amended by Acts 1995, 74th Leg., ch.
921, § 4, eff. Jan. 1, 1996.
§ 4.212. PRESENTMENT BY NOTICE OF ITEM NOT PAYABLE BY,
THROUGH OR AT A BANK; LIABILITY OF DRAWER OR
INDORSER. (a) Unless otherwise instructed, a collecting bank may
present an item not payable by, through, or at a bank by sending to
the party to accept or pay a written notice that the bank holds the
item for acceptance or payment. The notice must be sent in time to
be received on or before the day when presentment is due, and the
bank must meet any requirement of the party to accept or pay under
Section 3.501 by the close of the bank's next banking day after it
knows of the requirement.
(b) If presentment is made by notice and payment,
acceptance, or request for compliance with a requirement under
Section 3.501 is not received by the close of business on the day
after maturity or, in the case of demand items, by the close of
business on the third banking day after notice was sent, the
presenting bank may treat the item as dishonored and charge any
drawer or indorser by sending it notice of the facts.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Renumbered from § 4.210 and amended by Acts 1995, 74th Leg., ch.
921, § 4, eff. Jan. 1, 1996.
§ 4.213. MEDIUM AND TIME OF SETTLEMENT BY
BANK. (a) With respect to settlement by a bank, the medium and
time of settlement may be prescribed by Federal Reserve regulations
or circulars, clearing-house rules, and the like or by agreement.
In the absence of such a prescription:
(1) the medium of settlement is cash or credit to an
account in a Federal Reserve bank of or specified by the person to
receive settlement; and
(2) the time of settlement is:
(A) with respect to tender of settlement by cash,
a cashier's check, or a teller's check, when the cash or check is
sent or delivered;
(B) with respect to tender of settlement by
credit to an account in a Federal Reserve bank, when the credit is
made;
(C) with respect to tender of settlement by a
credit or debit to an account in a bank, when the credit or debit is
made or, in the case of tender of settlement by authority to charge
an account, when the authority is sent or delivered; or
(D) with respect to tender of settlement by a
funds transfer, when payment is made pursuant to Section 4A.406(a)
to the person receiving settlement.
(b) If the tender of settlement is not by a medium
authorized by Subsection (a) or the time of settlement is not fixed
by Subsection (a), a settlement does not occur until the tender of
settlement is accepted by the person receiving settlement.
(c) If settlement for an item is made by cashier's check or
teller's check and the person receiving settlement, before its
midnight deadline:
(1) presents or forwards the check for collection,
settlement is final when the check is finally paid; or
(2) fails to present or forward the check for
collection, settlement is final at the midnight deadline of the
person receiving settlement.
(d) If settlement for an item is made by giving authority to
charge the account of the bank giving settlement in the bank
receiving settlement, settlement is final when the charge is made
by the bank receiving settlement if there are funds available in the
account for the amount of the item.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1983, 68th Leg., p. 1531, ch. 290, § 4, eff. Aug.
29, 1983. Renumbered from § 4.211 and amended by Acts 1995, 74th
Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.214. RIGHT OF CHARGE-BACK OR REFUND; LIABILITY OF
COLLECTING BANK; RETURN OF ITEM. (a) If a collecting bank has
made provisional settlement with its customer for an item and fails
by reason of dishonor, suspension of payments by a bank, or
otherwise to receive settlement for the item that is or becomes
final, the bank may revoke the settlement given by it, charge back
the amount of any credit given for the item to its customer's
account, or obtain refund from its customer, whether or not it is
able to return the item, if by its midnight deadline or within a
longer reasonable time after it learns the facts it returns the item
or sends notification of the facts. If the return or notice is
delayed beyond the bank's midnight deadline or a longer reasonable
time after it learns the facts, the bank may revoke the settlement,
charge back the credit, or obtain refund from its customers, but it
is liable for any loss resulting from the delay. These rights to
revoke, charge-back, and obtain refund terminate if and when a
settlement for the item received by the bank is or becomes final.
(b) A collecting bank returns an item when it is sent or
delivered to the bank's customer or transferor or pursuant to its
instructions.
(c) A depositary bank that is also the payor may charge-back
the amount of an item to its customer's account or obtain refund in
accordance with the section governing return of an item received by
a payor bank for credit on its books (Section 4.301).
(d) The right to charge-back is not affected by:
(1) previous use of a credit given for the item; or
(2) failure by any bank to exercise ordinary care with
respect to the item, but a bank so failing remains liable.
(e) A failure to charge-back or claim refund does not affect
other rights of the bank against the customer or any other party.
(f) If credit is given in dollars as the equivalent of the
value of an item payable in foreign money, the dollar amount of any
charge-back or refund must be calculated on the basis of the
bank-offered spot rate for the foreign money prevailing on the day
when the person entitled to the charge-back or refund learns that it
will not receive payment in ordinary course.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Renumbered from § 4.212 and amended by Acts 1995, 74th Leg., ch.
921, § 4, eff. Jan. 1, 1996.
§ 4.215. FINAL PAYMENT OF ITEM BY PAYOR BANK; WHEN
PROVISIONAL DEBITS AND CREDITS BECOME FINAL; WHEN CERTAIN CREDITS
BECOME AVAILABLE FOR WITHDRAWAL. (a) An item is finally paid by a
payor bank when the bank has first done any of the following:
(1) paid the item in cash;
(2) settled for the item without having a right to
revoke the settlement under statute, clearing-house rule, or
agreement; or
(3) made a provisional settlement for the item and
failed to revoke the settlement in the time and manner permitted by
statute, clearing-house rule, or agreement.
(b) If provisional settlement for an item does not become
final, the item is not finally paid.
(c) If provisional settlement for an item between the
presenting and payor banks is made through a clearing house or by
debits or credits in an account between them, then to the extent
that provisional debits or credits for the item are entered in
accounts between the presenting and payor banks or between the
presenting and successive prior collecting banks seriatim, they
become final upon final payment of the item by the payor bank.
(d) If a collecting bank receives a settlement for an item
that is or becomes final, the bank is accountable to its customer
for the amount of the item, and any provisional credit given for the
item in an account with its customer becomes final.
(e) Subject to (i) applicable law stating a time for
availability of funds, and (ii) any right of the bank to apply the
credit to an obligation of the customer, credit given by a bank for
an item in a customer's account becomes available for withdrawal as
of right if the bank:
(1) has received a provisional settlement for the
item,--when the settlement becomes final and the bank has had a
reasonable time to receive return of the item and the item has not
been received within that time; or
(2) is both the depositary bank and the payor bank, and
the item is finally paid,--at the opening of the bank's second
banking day following receipt of the item.
(f) Subject to applicable law stating a time for
availability of funds and any right of a bank to apply a deposit to
an obligation of the depositor, a deposit of money becomes
available for withdrawal as of right at the opening of the bank's
next banking day after receipt of the deposit.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1985, 69th Leg., ch. 621, § 1, eff. June 14,
1985. Renumbered from § 4.213 and amended by Acts 1995, 74th
Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.216. INSOLVENCY AND PREFERENCE. (a) If an item is
in or comes into the possession of a payor or collecting bank that
suspends payment and the item has not been finally paid, the item
must be returned by the receiver, trustee, or agent in charge of the
closed bank to the presenting bank or the closed bank's customer.
(b) If a payor bank finally pays an item and suspends
payments without making a settlement for the item with its customer
or the presenting bank, which settlement is or becomes final, the
owner of the item has a preferred claim against the payor bank.
(c) If a payor bank gives or a collecting bank gives or
receives a provisional settlement for an item and thereafter
suspends payments, the suspension does not prevent or interfere
with the settlement's becoming final if the finality occurs
automatically upon the lapse of certain time or the happening of
certain events.
(d) If a collecting bank receives from subsequent parties
settlement for an item, which settlement is or becomes final, and
the bank suspends payments without making a settlement for the item
with its customer, which settlement is or becomes final, the owner
of the item has a preferred claim against the collecting bank.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Renumbered from § 4.214 and amended by Acts 1995, 74th Leg., ch.
921, § 4, eff. Jan. 1, 1996.
SUBCHAPTER C. COLLECTION OF ITEMS: PAYOR BANKS
§ 4.301. DEFERRED POSTING; RECOVERY OF PAYMENT BY
RETURN OF ITEMS; TIME OF DISHONOR; RETURN OF ITEMS BY PAYOR
BANK. (a) If a payor bank settles for a demand item other than a
documentary draft presented otherwise than for immediate payment
over the counter before midnight of the banking day of receipt, the
payor bank may revoke the settlement and recover the settlement if,
before it has made final payment and before its midnight deadline,
it:
(1) returns the item; or
(2) sends written notice of dishonor or nonpayment if
the item is unavailable for return.
(b) If a demand item is received by a payor bank for credit
on its books, it may return the item or send notice of dishonor and
may revoke any credit given or recover the amount thereof withdrawn
by its customer, if it acts within the time limit and in the manner
specified in Subsection (a).
(c) Unless previous notice of dishonor has been sent, an
item is dishonored at the time when for purposes of dishonor it is
returned or notice sent in accordance with this section.
(d) An item is returned:
(1) as to an item presented through a clearing house,
when it is delivered to the presenting or last collecting bank or to
the clearing house or is sent or delivered in accordance with
clearing-house rules; or
(2) in all other cases, when it is sent or delivered to
the bank's customer or transferor or pursuant to instructions.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.302. PAYOR BANK'S RESPONSIBILITY FOR LATE RETURN OF
ITEM. (a) If an item is presented to and received by a payor bank,
the bank is accountable for the amount of:
(1) a demand item, other than a documentary draft,
whether properly payable or not, if the bank, in any case in which
it is not also the depositary bank, retains the item beyond midnight
of the banking day of receipt without settling for it or, whether or
not it is also the depositary bank, does not pay or return the item
or send notice of dishonor until after its midnight deadline; or
(2) any other properly payable item unless, within the
time allowed for acceptance or payment of that item, the bank either
accepts or pays the item or returns it and accompanying documents.
(b) The liability of a payor bank to pay an item pursuant to
Subsection (a) is subject to defenses based on breach of a
presentment warranty (Section 4.208) or proof that the person
seeking enforcement of the liability presented or transferred the
item for the purpose of defrauding the payor bank.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.303. WHEN ITEMS SUBJECT TO NOTICE, STOP-PAYMENT
ORDER, LEGAL PROCESS, OR SETOFF; ORDER IN WHICH ITEMS MAY BE
CHARGED OR CERTIFIED. (a) Any knowledge, notice, or stop-payment
order received by, legal process served upon, or setoff exercised
by a payor bank comes too late to terminate, suspend, or modify the
bank's right or duty to pay an item or to charge its customer's
account for the item if the knowledge, notice, stop-payment order,
or legal process is received or served and a reasonable time for the
bank to act thereon expires or the setoff is exercised after the
earliest of the following:
(1) the bank accepts or certifies the item;
(2) the bank pays the item in cash;
(3) the bank settles for the item without having a
right to revoke the settlement under statute, clearing-house rule,
or agreement;
(4) the bank becomes accountable for the amount of the
item under Section 4.302 dealing with the payor bank's
responsibility for late return of items; or
(5) with respect to checks, a cutoff hour not earlier
than one hour after the opening of the next banking day after the
banking day on which the bank received the check and not later than
the close of that next banking day or, if no cutoff hour is fixed,
the close of the next banking day after the banking day on which the
bank received the check.
(b) Subject to Subsection (a), items may be accepted, paid,
certified, or charged to the indicated account of a bank's customer
in any order and before or after the bank's regular banking hours.
A bank is under no obligation to determine the time of day an item is
received and without liability may withhold the amount thereof
pending a determination of the effect, consequence or priority of
any knowledge, notice, stop-payment order, or legal process
concerning the same, or interplead such amount and the claimants
thereto.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1985, 69th Leg., ch. 621, § 2, eff. June 14,
1985; Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
SUBCHAPTER D. RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER
§ 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 the bank.
(b) A customer is not liable for the amount of an overdraft
if the customer neither signed the item nor benefited from the
proceeds of the item.
(c) 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 4.403(b) for stop-payment orders 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 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 4.402.
(d) 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.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.402. BANK'S LIABILITY TO CUSTOMER FOR WRONGFUL
DISHONOR. (a) Except as otherwise provided by this chapter, a
payor bank wrongfully dishonors an item if it dishonors an item that
is properly payable, but a bank may dishonor an item that would
create an overdraft unless it has agreed to pay the overdraft.
(b) A payor bank is liable to its customer for damages
proximately caused by the wrongful dishonor of an item. Liability
is limited to actual damages proved and may include damages for an
arrest or prosecution of the customer or other consequential
damages. Whether any consequential damages are proximately caused
by the wrongful dishonor is a question of fact to be determined in
each case.
(c) 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
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 reevaluating the bank's decision to dishonor the item,
the account balance at that time is determinative of whether a
dishonor for insufficiency of available funds is wrongful.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.403. CUSTOMER'S RIGHT TO STOP PAYMENT; BURDEN OF
PROOF OF LOSS. (a) A customer or any person authorized to draw on
the account if there is more than one person may stop payment of any
item drawn on the customer's account or close the account by an
order to the bank describing the item or account with reasonable
certainty received at a time and in a manner that affords the bank a
reasonable opportunity to act on it before any action by the bank
with respect to the item described in Section 4.303. If the
signature of more than one person is required to draw on an account,
any of those persons may stop payment or close the account.
(b) A stop-payment order is effective for six months and is
binding on the bank only if it is in writing, dated, and signed and
describes the item with certainty. A stop-payment order may be
renewed for additional six-month periods by a writing given to the
bank within a period during which the stop-payment order is
effective.
(c) The burden of establishing the fact and amount of loss
resulting from the payment of an item contrary to a stop-payment
order or order to close an account is on the customer. The loss from
payment of an item contrary to a stop-payment order may include
damages for dishonor of subsequent items under Section 4.402.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.404. BANK NOT OBLIGATED TO PAY CHECK MORE THAN SIX
MONTHS OLD. A bank is under no obligation to a customer having a
checking account to pay a check, other than a certified check, that
is presented more than six months after its date, but it may charge
its customer's account for a payment made thereafter in good faith.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.405. DEATH OR INCOMPETENCE OF CUSTOMER. (a) A
payor or collecting bank's authority to accept, pay, or collect an
item or to account for proceeds of its collection, if otherwise
effective, is not rendered ineffective by the incompetence of a
customer of either bank existing at the time the item is issued or
its collection is undertaken if the bank does not know of an
adjudication of incompetence. Neither death nor incompetence of a
customer revokes the authority to accept, pay, collect, or account
until the bank knows of the fact of death or of an adjudication of
incompetence and has reasonable opportunity to act on it.
(b) Even with knowledge, a bank may for 10 days after the
date of death pay or certify checks drawn on or before that date
unless ordered to stop payment by a person claiming an interest in
the account.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.406. CUSTOMER'S DUTY TO DISCOVER AND REPORT
UNAUTHORIZED SIGNATURE OR ALTERATION. (a) A bank that sends or
makes available to a customer a statement of account showing
payment of items for the account shall either return or make
available to the customer the items paid or provide information in
the statement of account sufficient to allow the customer
reasonably to identify the items paid. The statement of account
provides sufficient information if the item is described by item
number, amount, and date of payment. If the bank does not return
the items, it shall provide in the statement of account the
telephone number that the customer may call to request an item or a
legible copy of the items pursuant to Subsection (b).
(b) If the items are not returned to the customer, the
person retaining the items shall either retain the items or, if the
items are destroyed, maintain the capacity to furnish legible
copies of the items until the expiration of seven years after
receipt of the items. A customer may request an item from the bank
that paid the item, and that bank must provide in a reasonable time
either the item or, if the item has been destroyed or is not
otherwise obtainable, a legible copy of the item. A bank shall
provide, on request and without charge to the customer, at least two
items or a legible copy of the items with respect to each statement
of account sent to the customer.
(c) If a bank sends or makes available a statement of
account or items pursuant to Subsection (a), the customer must
exercise reasonable promptness in examining the statement or the
items to determine whether any payment was not authorized because
of an alteration of an item or because a purported signature by or
on behalf of the customer was not authorized. If, based on the
statement or items provided, the customer should reasonably have
discovered the unauthorized payment, the customer must promptly
notify the bank of the relevant facts.
(d) If the bank proves that the customer failed, with
respect to an item, to comply with the duties imposed on the
customer by Subsection (c), the customer is precluded from
asserting against the bank:
(1) the customer's unauthorized signature or any
alteration on the item, if the bank also proves that it suffered a
loss by reason of the failure; and
(2) the customer's unauthorized signature or
alteration by the same wrongdoer on any other item paid in good
faith by the bank if the payment was made before the bank received
notice from the customer of the unauthorized signature or
alteration and after the customer had been afforded a reasonable
period of time, not exceeding 30 days, in which to examine the item
or statement of account and notify the bank.
(e) If Subsection (d) applies and the customer proves that
the bank failed to exercise ordinary care in paying the item and
that the failure contributed to loss, the loss is allocated between
the customer precluded and the bank asserting the preclusion
according to the extent to which the failure of the customer to
comply with Subsection (c) and the failure of the bank to exercise
ordinary care contributed to the loss. If the customer proves that
the bank did not pay the item in good faith, the preclusion under
Subsection (d) does not apply.
(f) Without regard to care or lack of care of either the
customer or the bank, a customer who does not within one year after
the statement or items are made available to the customer
(Subsection (a)) discover and report the customer's unauthorized
signature on or any alteration on the item is precluded from
asserting against the bank the unauthorized signature or
alteration. If there is a preclusion under this subsection, the
payor bank may not recover for breach of warranty under Section
4.208 with respect to the unauthorized signature or alteration to
which the preclusion applies.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.407. PAYOR BANK'S RIGHT TO SUBROGATION ON IMPROPER
PAYMENT. If a payor bank has paid an item over the order of the
drawer or maker to stop payment, or after an account has been
closed, or otherwise under circumstances giving a basis for
objection by the drawer or maker, to prevent unjust enrichment and
only to the extent necessary to prevent loss to the bank by reason
of its payment of the item, the payor bank is subrogated to the
rights:
(1) of any holder in due course on the item against the
drawer or maker;
(2) of the payee or any other holder of the item
against the drawer or maker either on the item or under the
transaction out of which the item arose; and
(3) of the drawer or maker against the payee or any
other holder of the item with respect to the transaction out of
which the item arose.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
SUBCHAPTER E. COLLECTION OF DOCUMENTARY DRAFTS
§ 4.501. HANDLING OF DOCUMENTARY DRAFTS; DUTY TO SEND
FOR PRESENTMENT AND TO NOTIFY CUSTOMER OF DISHONOR. A bank that
takes a documentary draft for collection shall present or send the
draft and accompanying documents for presentment and, upon learning
that the draft has not been paid or accepted in due course, shall
seasonably notify its customer of the fact even though it may have
discounted or bought the draft or extended credit available for
withdrawal as of right.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.502. PRESENTMENT OF "ON ARRIVAL" DRAFTS. If a draft
or the relevant instructions require presentment "on arrival",
"when goods arrive", or the like, the collecting bank need not
present until in its judgment a reasonable time for arrival of the
goods has expired. Refusal to pay or accept because the goods have
not arrived is not dishonor; the bank must notify its transferor of
the refusal but need not present the draft again until it is
instructed to do so or learns of the arrival of the goods.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.503. RESPONSIBILITY OF PRESENTING BANK FOR DOCUMENTS
AND GOODS; REPORT OF REASONS FOR DISHONOR; REFEREE IN CASE OF
NEED. Unless otherwise instructed and except as provided in
Chapter 5, a bank presenting a documentary draft:
(1) must deliver the documents to the drawee on
acceptance of the draft if it is payable more than three days after
presentment; otherwise, only on payment; and
(2) upon dishonor, either in the case of presentment
for acceptance or presentment for payment, may seek and follow
instructions from any referee in case of need designated in the
draft or, if the presenting bank does not choose to utilize the
referee's services, it must use diligence and good faith to
ascertain the reason for dishonor, must notify its transferor of
the dishonor and of the results of its effort to ascertain the
reasons therefor, and must request instructions.
However, the presenting bank is under no obligation with
respect to goods represented by the documents except to follow any
reasonable instructions seasonably received; it has a right to
reimbursement for any expense incurred in following instructions
and to prepayment of or indemnity for those expenses.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
§ 4.504. PRIVILEGE OF PRESENTING BANK TO DEAL WITH
GOODS; SECURITY INTEREST FOR EXPENSES. (a) A presenting bank
that, following the dishonor of a documentary draft, has seasonably
requested instructions but does not receive them within a
reasonable time may store, sell, or otherwise deal with the goods in
any reasonable manner.
(b) For its reasonable expenses incurred by action under
Subsection (a) the presenting bank has a lien upon the goods or
their proceeds, which may be foreclosed in the same manner as an
unpaid seller's lien.
Acts 1967, 60th Leg., p. 2343, ch. 785, § 1, eff. Sept. 1, 1967.
Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996.
