DEFINITION of 'Wrongful Dishonor'

A bank's failure to honor a valid negotiable instrument such as a cheque or draft that has been presented to it for payment. If the cheque is valid and there are sufficient funds in the account to cover it, a bank's failure to honor it within the time period stipulated by the Uniform Commercial Code would constitute wrongful dishonor.

BREAKING DOWN 'Wrongful Dishonor'

A payor bank is liable to its customer for damages caused by wrongful dishonor of an instrument. Liability is limited to actual damages proved and may include potential consequential damages.

RELATED TERMS
  1. Dishonor

    The action of refusing to fulfill contractual obligations or ...
  2. Bank Draft

    A type of check where the payment is guaranteed to be available ...
  3. Validation Period

    The amount of time necessary for the premium on an insurance ...
  4. Negotiable

    1. Describing the price of a good or security that is not firmly ...
  5. Demand Draft

    A method used by individuals to make transfer payments from one ...
  6. Uniform Commercial Code

    A standard set of business laws that regulate financial contracts. ...
Related Articles
  1. Insights

    What is Market Failure?

    Market failure happens when economic conditions cause a market to be unable to reach supply/demand market equilibrium.
  2. Small Business

    "Experienced Investors" And Damages Claims

    We look at what is meant by the term "experienced investor" and its implication during damages claims.
  3. Personal Finance

    Top 5 Biggest Bank Failures

    In recent decades, there have been some major bank failures. Here are five of the biggest in U.S. history.
  4. Personal Finance

    Are College Honor Societies Really Worth It?

    College honor societies may offer substantial benefits to members and alumni, but they are not the only way for you to achieve your goals.
  5. Personal Finance

    Banker's Acceptance 101

    A banker's acceptance, a common way of financing international trade activity, provides a relatively safe, short-term vehicle for investors. An acceptance is a negotiable time draft that a bank ...
  6. Trading

    Bucking The Trend With Pattern Failure Strategies

    The best trade could be in the opposite direction when a classic price pattern doesn't behave according to ideal rules.
  7. Trading

    Trading Against the Grid and Away from the Herd

    The best trade could be in the opposite direction when a classic price pattern doesn’t behave according to perfect rules.
  8. Insights

    Erin Brockovich Rumored to be Interested in American Airlines Uniform Issue (AAL)

    Staff at American Airlines say their uniforms are causing allergic reactions, but the airline says the uniforms are safe.
  9. Personal Finance

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
  10. Insights

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
RELATED FAQS
  1. How can I cancel a bank draft that I have purchased?

    Learn about what a bank draft is and how it works, the circumstances under which a bank draft may be cancelled, and what ... Read Answer >>
  2. Who uses bills of exchange?

    Find out who uses bills of exchange, why they are important in international trade and what happens when a bill is traded ... Read Answer >>
  3. How can minimum wages contribute to a market failure?

    See why minimum wage laws create a market failure among low-productivity workers by making it illegal for companies to hire ... Read Answer >>
  4. What is the average profit margin for a company in the banking sector?

    Learn what the average profit margin is for companies in the banking sector, along with other evaluation metrics often used ... Read Answer >>
  5. What's the difference between investment banks and commercial banks?

    Understand the principal differences between investment banks and commercial banks, and the areas of banking services that ... Read Answer >>
Trading Center