Wrongful Dishonor


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.

  1. Check

    A written, dated and signed instrument that contains an unconditional ...
  2. Uniform Commercial Code

    A standard set of business laws that regulate financial contracts. ...
  3. Demand Draft

    A method used by individuals to make transfer payments from one ...
  4. Bank Draft

    A type of check where the payment is guaranteed to be available ...
  5. Altered Check

    A check or another negotiable instrument that has been materially ...
  6. Credit Union

    Member-owned financial co-operative. These institutions are created ...
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