Illinois Compiled Statutes
Information maintained by the Legislative Reference Bureau
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COMMERCIAL CODE810 ILCS 5/Art. 4 Pt. 4
(810 ILCS 5/) Uniform Commercial Code.
(810 ILCS 5/Art. 4 Pt. 4 heading)
RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER
810 ILCS 5/4-401
(810 ILCS 5/4-401)
(from Ch. 26, par. 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 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 any action by the bank 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
(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.
(Source: P.A. 87-582; 87-1135.)
810 ILCS 5/4-402
(810 ILCS 5/4-402)
(from Ch. 26, par. 4-402)
Bank's liability to customer for wrongful dishonor; time
of determining insufficiency of account.
(a) Except as otherwise provided in this Article, 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 had 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.
(Source: P.A. 87-582; 87-1135.)
810 ILCS 5/4-403
(810 ILCS 5/4-403)
(from Ch. 26, par. 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 these persons
may stop payment or close the account.
(b) A stop-payment order is effective for 6 months, but it lapses after 14
calendar days if the original order was oral and was not confirmed in writing
within that period. 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
pursuant to Section 4-402.
(d) When a bank sends to its customer a statement of account
accompanied by items paid in good faith in support of the debit entries or
holds the statement of account and items pursuant to a request or
instructions of its customer or otherwise in a reasonable manner makes the
statement and items available to the customer or, in lieu of returning such
items, sends its customer a statement of account which includes the
identifying number of each item paid in good faith or otherwise
specifically identifying such items or holds such statement pursuant to a
request or instructions of its customer or otherwise in a reasonable manner
makes such statement available to the customer, the customer must exercise
reasonable care and promptness to examine the items and statement to
discover any items improperly paid by the bank over the customer's properly
lodged stop payment order and must notify the bank promptly after discovery
thereof. Failure of the customer to notify the bank within one year of
either receipt of the item improperly paid by the bank over a properly
lodged stop payment order or, in lieu of receipt of the improperly paid
item, receipt of a statement containing the debit entry for said item and
specifically identifying said item shall preclude the customer from
asserting against the bank the improper payment.
(Source: P.A. 86-583; 87-582; 87-1135.)
810 ILCS 5/4-404
(810 ILCS 5/4-404)
(from Ch. 26, par. 4-404)
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, which is presented more than 6
months after its date, but it may charge its customer's account for a
payment made thereafter in good faith.
(Source: Laws 1961, p. 2101.)
810 ILCS 5/4-405
(810 ILCS 5/4-405)
(from Ch. 26, par. 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 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.
(Source: P.A. 87-582; 87-1135.)
810 ILCS 5/4-406
(810 ILCS 5/4-406)
(from Ch. 26, par. 4-406)
Customer's duty to discover and report unauthorized signature
(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
(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
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.)
810 ILCS 5/4-407
(810 ILCS 5/4-407)
(from Ch. 26, par. 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
(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.
(Source: P.A. 87-582; 87-1135.)