Tennessee Code Annotated

Tenn. Code Ann. § 47-4-103 (2026)

Variation by agreement; measure of damages; action constituting ordinary care

✓ current as of May 2026

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(a) The effect of the provisions of this chapter may be varied by agreement, to the extent the agreement does not disclaim a bank's responsibility for its own lack of good faith and is not manifestly unreasonable.

(b) Federal Reserve regulations and operating circulars, clearing-house 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.

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

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

(e) 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.

Acts 1963, ch. 81, § 1 (4-103); 1995, ch. 397, § 3.

Notes of Decisions

Cited in 8 cases, 1981–2011 · leading case: C-Wood Lumber Co. v. Wayne Cnty. Bank, 233 S.W.3d 263 (Tenn. Ct. App. 2007).

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C-Wood Lumber Co. v. Wayne Cnty. Bank, 233 S.W.3d 263 (Tenn. Ct. App. 2007). · cites it 10× “C-Wood further alleged that the December 5, 1989 corporate resolution was insufficient to reheve the bank of its duties to C-Wood under Tenn. Code Ann. § 47-4-103 (a). 4 On November 17, 1997, C-Wood filed a motion for summary judgment regarding its claim that Tenn.”

Yeiser v. Bank of Adamsville, 614 S.W.2d 338 (Tenn. 1981). · cites it 6× “The effect of Federal Reserve Operating Letters as agreements that may vary the provisions of the UCC are expressly dealt with in T.C.A. § 47-4-103, the text of which is as follows: 47-4-103.”

Glazer v. First Am. Nat'l Bank, 930 S.W.2d 546 (Tenn. 1996). · cites it 3× “It cites in support of this argument Tenn.Code Ann. § 47-4-103(5), part of the UCC chapter entitled “bank deposits and collections,” which provides that: The measure of damages for the failure to exercise ordinary care in handling an item is the amount of the item reduced by an…”

Vending Chattanooga, Inc. v. Am. Nat'l Bank & Trust Co., 730 S.W.2d 624 (Tenn. 1987). · cites it 4× “TCA § 47-4-103, provides in part: ... (3) Action or nonaction approved by this chapter or pursuant to federal reserve regulations or operating letters constitutes the exercise of ordinary care and, in the absence of special instructions, action or nonaction consistent with…”

Memphis Aero Corp. v. First Am. Nat'l Bank, 647 S.W.2d 219 (Tenn. 1983). · cites it 6× “§ 47 — 4-302(b) 3 or whether its liability is limited to damages proximately caused by its negligence under the general provisions of T.C.A. § 47-4-103(5). If the latter measure is applied, no recovery is warranted because the bank customer, which owed the debt out of which the…”

Smallman v. Home Fed. Sav. Bank of Tennessee, 786 S.W.2d 954 (Tenn. Ct. App. 1989). · cites it 6× “In support of its position, Home Federal asserts that: (1) there was no evidence to show that it was negligent in handling the check; (2) even if there was proof sufficient to establish negligence, it could charge-back on the unpaid item anyway; (3) the Plaintiffs failed to…”

First Am. Nat'l Bank of Nashville v. Com. Union Bank of White Cnty., 692 S.W.2d 642 (Tenn. Ct. App. 1985). · cites it 2× “Plaintiff refers to T.C.A. § 47-4-103(1), which has no application to the facts of this case.”

Clara Jean West, by & through Janet L. Harvey, Conservator & Est. of Robert Stokes West, by & through Janet L. Harvey, Adm'r v. Regions Bank (Tenn. Ct. App. 2011). · cites it 2× “” Id. at 287. Thus, as to the checks deposited into the secretary/treasurer’s personal bank account, the court held that the bank was acting in good faith and in a commercially reasonable manner, and so the corporation, not the bank, had to bear the loss from the fiduciary’s…”

— Tenn. Code Ann. § 47-4-103(1) — 1 case

First Am. Nat'l Bank of Nashville v. Com. Union Bank of White Cnty., 692 S.W.2d 642 (Tenn. Ct. App. 1985). “Plaintiff refers to T.C.A. § 47-4-103(1), which has no application to the facts of this case.”

— Tenn. Code Ann. § 47-4-103(5) — 4 cases

Glazer v. First Am. Nat'l Bank, 930 S.W.2d 546 (Tenn. 1996). “It cites in support of this argument Tenn.Code Ann. § 47-4-103(5), part of the UCC chapter entitled “bank deposits and collections,” which provides that: The measure of damages for the failure to exercise ordinary care in handling an item is the amount of the item reduced by an…”

Memphis Aero Corp. v. First Am. Nat'l Bank, 647 S.W.2d 219 (Tenn. 1983). “§ 47 — 4-302(b) 3 or whether its liability is limited to damages proximately caused by its negligence under the general provisions of T.C.A. § 47-4-103(5). If the latter measure is applied, no recovery is warranted because the bank customer, which owed the debt out of which the…”

Yeiser v. Bank of Adamsville, 614 S.W.2d 338 (Tenn. 1981). “The effect of Federal Reserve Operating Letters as agreements that may vary the provisions of the UCC are expressly dealt with in T.C.A. § 47-4-103, the text of which is as follows: 47-4-103.”

Smallman v. Home Fed. Sav. Bank of Tennessee, 786 S.W.2d 954 (Tenn. Ct. App. 1989). “In support of its position, Home Federal asserts that: (1) there was no evidence to show that it was negligent in handling the check; (2) even if there was proof sufficient to establish negligence, it could charge-back on the unpaid item anyway; (3) the Plaintiffs failed to…”

— Tenn. Code Ann. § 47-4-103(a) — 2 cases

C-Wood Lumber Co. v. Wayne Cnty. Bank, 233 S.W.3d 263 (Tenn. Ct. App. 2007). “C-Wood further alleged that the December 5, 1989 corporate resolution was insufficient to reheve the bank of its duties to C-Wood under Tenn. Code Ann. § 47-4-103 (a). 4 On November 17, 1997, C-Wood filed a motion for summary judgment regarding its claim that Tenn.”

Clara Jean West, by & through Janet L. Harvey, Conservator & Est. of Robert Stokes West, by & through Janet L. Harvey, Adm'r v. Regions Bank (Tenn. Ct. App. 2011). “” Id. at 287. Thus, as to the checks deposited into the secretary/treasurer’s personal bank account, the court held that the bank was acting in good faith and in a commercially reasonable manner, and so the corporation, not the bank, had to bear the loss from the fiduciary’s…”

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