Ky. Rev. Stat. » Chapter 355
Kentucky Revised Statutes

Ky. Rev. Stat. § 355.4-103 (2026)

Variation by agreement -- Measure of damages -- Action constituting

✓ current as of May 2026
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ordinary care.

(1) The effect of the provisions of this article 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.

(2) Federal Reserve regulations and operating circulars, clearing-house rules, and the like have the effect of agreements under subsection (1) of this section, whether or not specifically assented to by all parties interested in items handled.

(3) Action or nonaction approved by this article or pursuant to Federal Reserve regulations or operating circulars is the exercise of ordinary care and, in the absence of special instructions, action or nonaction consistent with clearing-house rules and the like or with a general banking usage not disapproved by this article, is prima facie the exercise of ordinary care.

(4) The specification or approval of certain procedures by this article is not disapproval of other procedures that may be reasonable under the circumstances.

(5) 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. Effective: January 1, 1997 History: Amended 1996 Ky. Acts ch. 130, sec. 74, effective January 1, 1997. -- Created 1958 Ky. Acts ch. 77, sec. 4-103, effective July 1, 1960.

Notes of Decisions
Cited in 6 cases, 1977–1999 · leading case: Blake v. Woodford Bank & Trust Co., 555 S.W.2d 589 (Ky. Ct. App. 1977).
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Blake v. Woodford Bank & Trust Co., 555 S.W.2d 589 (Ky. Ct. App. 1977). “See also § 4-103(2) of the UCC (KRS 355.4-103(2)) and Comment 3 of the Official Code Comment.”
Concrete Materials Corp. v. Bank of Danville & Trust Co., 938 S.W.2d 254 (Ky. 1997). “The official commentary to KRS 355.4-103(1) states that an account agreement is controlling unless it is manifestly unreasonable.”
Pulliam v. Pulliam, 738 S.W.2d 846 (Ky. Ct. App. 1987). “However, we do not believe the appellee institution breached any duties to him or any contract; nor do those portions of the Uniform Commercial Code cited by Virgil, KRS 355.4-103 and KRS 355.4-402, place any higher standard of care on the bank than that required under common…”
Huntmix, Inc. v. Bank of Am., 34 U.C.C. Rep. Serv. (West) 617 (Cal. Ct. App. 1982). “See also § 4-103(2) of the UCC (KRS 355.4-103(2)) and Comment 3 of the Official Code Comment.”
Ousley v. First Commonwealth Bank of Prestonsburg, 8 S.W.3d 45 (Ky. Ct. App. 1999). “The question that necessarily follows is, is there implied in this duty of good faith and fair dealing a duty on the part of a bank to provide its former customer with records of their accounts? We believe there is.”
United Kentucky Bank, Inc. v. Eagle Mach. Co., 644 S.W.2d 649 (Ky. Ct. App. 1983). “The bank finds authority for its adoption of rules in KRS 355.4-103 and further urges that since appellee agreed to abide by such rules that it cannot complain that United resubmitted the draft for collection.”
— Ky. Rev. Stat. § 355.4-103(1) — 1 case
Concrete Materials Corp. v. Bank of Danville & Trust Co., 938 S.W.2d 254 (Ky. 1997). “The official commentary to KRS 355.4-103(1) states that an account agreement is controlling unless it is manifestly unreasonable.”
— Ky. Rev. Stat. § 355.4-103(2) — 2 cases
Blake v. Woodford Bank & Trust Co., 555 S.W.2d 589 (Ky. Ct. App. 1977). “See also § 4-103(2) of the UCC (KRS 355.4-103(2)) and Comment 3 of the Official Code Comment.”
Huntmix, Inc. v. Bank of Am., 34 U.C.C. Rep. Serv. (West) 617 (Cal. Ct. App. 1982). “See also § 4-103(2) of the UCC (KRS 355.4-103(2)) and Comment 3 of the Official Code Comment.”
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