(810 ILCS 5/4-104) (from Ch. 26, par. 4-104)
Sec. 4-104. Definitions and index of definitions.
(a) In this Article, 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;
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(2) "Afternoon" means the period of a day between
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(3) "Banking day" means the part of a day on which a
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| bank is open to the public for carrying on substantially all of its banking functions, except that any day that is not a banking day for purposes of Federal Reserve Regulation CC (as may be amended from time to time) shall not be a banking day for purposes of this Article or Article 3;
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(4) "Clearing house" means an association of banks or
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| other payors regularly clearing items;
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(5) "Customer" means a person having an account with
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| a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank;
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(6) "Documentary draft" means a draft to be presented
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| 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;
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(7) "Draft" means a draft as defined in Section 3-104
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| or an item, other than an instrument, that is an order;
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(8) "Drawee" means a person ordered in a draft to
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(9) "Item" means an instrument or a promise or order
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| to pay money handled by a bank for collection or payment. The term does not include a payment order governed by Article 4A or a credit or debit card slip;
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(10) "Midnight deadline" with respect to a bank is
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| 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;
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(11) "Settle" means to pay in cash, by clearing-house
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| settlement, in a charge or credit or by remittance, or otherwise as agreed. A settlement may be either provisional or final;
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(12) "Suspends payments" with respect to a bank means
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| 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.
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(b) Other definitions applying to this Article and the Sections in which
they appear are:
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"Agreement for electronic |
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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. |
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(c) "Control" as provided in Section 7-106 and the
following definitions in other Articles apply to this Article:
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"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. | "Good faith" | Section 3-103. | "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. |
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(d) In addition Article 1 contains general definitions and principles of
construction and interpretation applicable throughout this Article.
(Source: P.A. 95-895, eff. 1-1-09 .)
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(810 ILCS 5/4-202) (from Ch. 26, par. 4-202)
Sec. 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 nonpayment 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;
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(3) settling for an item when the bank receives final
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(4) notifying its transferor of any loss or delay in
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| transit within a reasonable time after discovery thereof.
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(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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-204) (from Ch. 26, par. 4-204)
Sec. 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 nonbank payor if authorized by its |
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(3) an item other than documentary drafts to a
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| nonbank payor, if authorized by Federal Reserve regulation or operating circular, clearing-house rule, or the like.
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(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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-207) (from Ch. 26, par. 4-207)
Sec. 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 |
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(2) all signatures on the item are authentic and
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(3) the item has not been altered;
(4) the item is not subject to a defense or claim in
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| recoupment (Section 3-305(a)) of any party that can be asserted against the warrantor; and
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(5) the warrantor has no knowledge of any insolvency
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| proceeding commenced with respect to the maker or acceptor or, in the case of an unaccepted draft, the drawer.
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(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
may not 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.
(Source: P.A 87-582.)
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(810 ILCS 5/4-208) (from Ch. 26, par. 4-208)
Sec. 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;
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(2) the draft has not been altered; and
(3) the warrantor has no knowledge that the signature
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| of the purported drawer of the draft is unauthorized.
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(b) A drawee making payment may recover from any 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 (i)
breach of warranty is a defense to the obligation of the acceptor, and (ii) if
the acceptor makes payment with respect to the draft, the acceptor is entitled
to recover from any 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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-210) (from Ch. 26, par. 4-210)
Sec. 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;
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(2) in case of an item for which it has given credit
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| 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
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(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 possession or control of the accompanying
documents for purposes other than collection, the security interest
continues to that extent and is subject to Article 9, but:
(1) no security agreement is necessary to make the
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| security interest enforceable (Section 9-203(b)(3)(A));
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(2) no filing is required to perfect the security
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(3) the security interest has priority over
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| conflicting perfected security interests in the item, accompanying documents, or proceeds.
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(Source: P.A. 95-895, eff. 1-1-09; 96-328, eff. 8-11-09.)
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(810 ILCS 5/4-213) (from Ch. 26, par. 4-213)
Sec. 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 agreement. In the absence of such
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
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(2) the time of settlement is:
(i) with respect to tender of settlement by cash,
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| a cashier's check, or teller's check, when the cash or check is sent or delivered;
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(ii) with respect to tender of settlement by
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| credit in an account in a Federal Reserve Bank, when the credit is made;
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(iii) with respect to tender of settlement by a
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| 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
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(iv) with respect to tender of settlement by a
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| funds transfer, when payment is made pursuant to Section 4A-406(a) to the person receiving settlement.
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(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), no
settlement occurs 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,
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| settlement is final when the check is finally paid; or
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(2) fails to present or forward the check for
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| collection, settlement is final at the midnight deadline of the person receiving settlement.
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(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.
(Source: P.A. 87-582.)
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(810 ILCS 5/4-214) (from Ch. 26, par. 4-214)
Sec. 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 which
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 customer, but
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.
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(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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-215) (from Ch. 26, par. 4-215)
Sec. 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
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(3) made a provisional settlement for the item and
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| failed to revoke the settlement in the time and manner permitted by statute, clearing-house rule, or agreement.
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(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 items by the payor bank.
(d) If a collecting bank receives a settlement for an item which 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) 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:
(1) if the bank has received a provisional settlement
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| 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;
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(2) if the bank is both the depositary bank and the
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| payor bank, and the item is finally paid, at the opening of the bank's second banking day following receipt of the item.
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(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.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-301) (from Ch. 26, par. 4-301)
Sec. 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.
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(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,
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| 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
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(2) in all other cases, when it is sent or delivered
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| to the bank's customer or transferor or pursuant to instructions.
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(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-302) (from Ch. 26, par. 4-302)
Sec. 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
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(2) any other properly payable item unless, within
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| the time allowed for acceptance or payment of that item, the bank either accepts or pays the item or returns it and accompanying documents.
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(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.
(Source: P.A. 87-582; 87-1135; 87-1242; 88-123.)
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(810 ILCS 5/4-303) (from Ch. 26, par. 4-303)
Sec. 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;
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(4) the bank becomes accountable for the amount of
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| the item under Section 4-302 dealing with the payor bank's responsibility for late return of items; or
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(5) with respect to checks, a cutoff hour no earlier
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| than one hour after the opening of the next banking day after the banking day on which the bank received the check and no 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.
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(b) Subject to subsection (a), items may be accepted, paid, certified, or
charged to the indicated account of its customer in any order.
(Source: P.A. 87-582; 87-1135.)
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(810 ILCS 5/4-406) (from Ch. 26, par. 4-406)
Sec. 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 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.
(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 7 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.
(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
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(2) the customer's unauthorized signature or
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| 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.
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(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
substantially 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.
(Source: P.A. 87-582; 87-1135.)
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