Delaware Code

6 Del. C. § 4-402 (2026)

Bank’s liability to customer for wrongful dishonor; time of determining insufficiency of account

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(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 has 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.

5A Del. C. 1953, §§ 4-402; 55 Del. Laws, c. 349; 70 Del. Laws, c. 86, § 4;

Notes of Decisions

Cited in 4 cases, 1975–1990 · leading case: Farmers Bank v. Sinwellan Corp., 367 A.2d 180 (Del. 1976).

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Farmers Bank v. Sinwellan Corp., 367 A.2d 180 (Del. 1976). · cites it 3× “§ 371 before it may maintain the action; and (2) Does the individual plaintiff have a cause of action under 6 Del.C. § 4-402? I The facts in which these questions arise are relatively simple and, for present purposes, are undisputed.”

Sinwellan Corp. v. Farmers Bank of Delaware, 345 A.2d 430 (Del. Super. Ct. 1975). “6 Del.C. § 4-402. “Customer” is defined as “any person having an account with a bank or for whom a bank has agreed to collect items and includes a bank carrying an account with another bank;”.”

Parrett v. Platte Valley State Bank & Trust Co., 459 N.W.2d 371 (Neb. 1990). “The Supreme Court of Delaware held that Sinclair was not a “customer” of Farmers Bank and, therefore, did not have a cause of action, and stated: 6 Del.C. § 4-402 provides that a “bank is hable to its customer for damages proximately caused by the *148 wrongful dishonor of” a…”

Parrett v. Platte Valley State Bank & Tr., 459 N.W.2d 371 (Neb. 1990). “The Supreme Court of Delaware held that Sinclair was not a "customer" of Farmers Bank and, therefore, did not have a cause of action, and stated: 6 Del.C. § 4-402 provides that a "bank is liable to its customer for damages proximately caused by the wrongful dishonor of" a check.”

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