Ark. Code Ann. § 4-4-103 (2020)
Variation by agreement — Measure of damages — Action constituting ordinary care
- The effect of the provisions of this chapter may be varied by agreement, but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.
- Federal Reserve regulations and operating circulars, clearinghouse rules, and the like have the effect of agreements under subsection (a), whether or not specifically assented to by all parties interested in items handled.
- Action or non-action approved by this chapter or pursuant to Federal Reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or non-action consistent with clearinghouse rules and the like or with a general banking usage not disapproved by this chapter, is prima facie the exercise of ordinary care.
- The specification or approval of certain procedures by this chapter is not disapproval of other procedures that may be reasonable under the circumstances.
- The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith, it includes any other damages the party suffered as a proximate consequence.
History. Acts 1961, No. 185, § 4-103; reen. 1967, No. 303, § 12 (4-103); A.S.A. 1947, § 85-4-103; Acts 1991, No. 572, § 6.
Research References
Ark. L. Rev.
Comment, Gordon v. Planters & Merchants Bancshares: Punitive Damages May Be Awarded For Bank's Wrongful Charge-Back, 51 Ark. L. Rev. 611.
Case Notes
Disclaimer of Transfer Warranties.
Where a bank customer breached the transfer warranties under § 4-4-207 by depositing and receiving payment for a check with an altered payee line, an alleged agreement to disclaim transfer warranties would not have been valid because such a disclaimer was expressly prohibited with respect to checks by § 4-4-207(d). Talbert v. United States Bank, N.A., 372 Ark. 148, 271 S.W.3d 486 (2008).
Measure of Damages.
In a suit by a payee against a bank for negligence in failing to timely notify the payee that the checks had been dishonored, the amount of damages was limited, absent a showing of bad faith, by the amount of the dishonored items reduced by the amount which would not have been recovered even if the bank had exercised ordinary care. Citizens Bank v. Chitty, 285 Ark. 55, 684 S.W.2d 814 (1985).
Notice of Encoding Error.
Where supplier's bank wrongly encoded a check but the supplier did not notice the error for seven months, the account agreement, which required the supplier to notify the supplier's bank of “any other errors” within 60 days, did not bar supplier's negligence suit because the agreement applied only to the types of transactions or errors specifically identified in § 4-4-406 (unauthorized signatures and alterations) and not to encoding errors. Douglas Cos. v. Commercial Nat'l Bank of Texarkana, 419 F.3d 812 (8th Cir. 2005).
Cited: Gordon v. Planters & Merchants Bankshares, Inc., 326 Ark. 1046, 935 S.W.2d 544 (1996).