Tennessee Code Annotated
Tenn. Code Ann. § 47-4-402 (2026)
Bank's liability to customer for wrongful dishonor - Time of determining insufficiency of account
✓ current as of May 2026
- (a) Except as otherwise provided in this chapter, 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.
Acts 1963, ch. 81, § 1 (4-402); 1995, ch. 397, § 3.
Notes of Decisions
Cited in 1
case, 1984–1984 · leading case: Pera v. Kroger Co., 674 S.W.2d 715 (Tenn. 1984).
Pera v. Kroger Co., 674 S.W.2d 715 (Tenn. 1984). “and that the bank is not liable for any consequential damages resulting from wrongful dishonor as provided in T.C.A. § 47-4-402. The latter statute makes a payor bank liable to its customer for damages proximately resulting from wrongful dishonor of an item.”
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