Indiana § 26-1-4-402 - Bank's liability to customer for wrongful dishonor; time of determining insufficiency of account
Full text of Indiana Indiana Code § 26-1-4-402 — Bank's liability to customer for wrongful dishonor; time of determining insufficiency of account, with citation guidance and answers to common questions.
§ 26-1-4-402. Bank's liability to customer for wrongful dishonor; time of determining insufficiency of account
Sec. 402. (a) Except as otherwise provided in IC 26-1-4, 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 (1) 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.
Formerly: Acts 1963, c.317, s.4-402. As amended by P.L.222-1993, SEC.37.
Source: official Indiana text · Last verified 2026-08-27
Frequently Asked Questions About Indiana § 26-1-4-402
What does Indiana Code § 26-1-4-402 cover?
Section 26-1-4-402 ("Bank's liability to customer for wrongful dishonor; time of determining insufficiency of account") is part of the Indiana Code, the codified statutory law of Indiana. It sets out the legal rule or procedure described in the text above. Statutes are amended regularly, so always verify against the official source.
How do I cite Indiana § 26-1-4-402?
A common citation format is "Indiana Code § 26-1-4-402" (Indiana). Legal writing may require the code abbreviation, section number, and year or edition. Match the style required by your court, professor, or publisher.
Is this the official text of Indiana law?
No. This page is for research and education and may not include the most recent amendments. For official current law, check the Indiana official source linked on this page or consult a licensed Indiana attorney.
How does Indiana § 26-1-4-402 apply to my situation?
Statutes are interpreted in context, and application depends on your specific facts. Only a licensed attorney in Indiana can advise on how this section applies to you. Contact your state or local bar association for a referral.
Sources & Verification
Not legal advice. Verify against the official source and consult a licensed attorney in Indiana.