Code of Alabama

Ala. Code § 7-4-301 (2026)

Deferred Posting; Recovery of Payment by Return of Items; Time of Dishonor; Return of Items by Payor Bank.

✓ official Alabama Legislature (ALISON) text, current July 2026

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(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books, it may return the item or send notice of dishonor and may revoke any credit given or recover the amount thereof withdrawn by its customer, if it acts within the time limit and in the manner specified in subsection (a).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(Acts 1965, No. 549, p. 811; repealed by Acts 1995, No. 95-668, p. 1381, §2; added by Acts 1995, No. 95-668, p. 1381, §2.)

Notes of Decisions

Cited in 3 cases, 1981–2014 · leading case: Cent. Bank of Alabama, Na v. Peoples Nat. Bank Huntsville, 401 So. 2d 14 (Ala. 1981).

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Cent. Bank of Alabama, Na v. Peoples Nat. Bank Huntsville, 401 So. 2d 14 (Ala. 1981). · cites it 3× “" On the other hand, Central says the trial court's judgment is erroneous because, under the facts of this case, Central complied with the provisions of Code 1975, § 7-4-301: (1) Where an authorized settlement for a demand item (other than a documentary draft) received by a…”

Troy Bank & Trust Co. v. The Citizens Bank, 166 So. 3d 57 (Ala. 2014). · cites it 6× “But, because Troy Bank did not refuse final payment and give written notice of dishonor before the midnight deadline, it is accountable for the loss under the provisions of § 7-4-301 and -302[, Ala.Code 1975]: “There is no evidence that Troy Bank complied with the FRB [Federal…”

Braden Furniture Co. v. Union State Bank, 109 So. 3d 625 (Ala. 2012). “; the collection of items by payor banks, see § 7-4-301 et seq.; and the relationship between a payor bank and its customer, see § 7-4-401 et seq.”

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