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Can you summarize Tex. Bus. & Com. Section 4.401?
RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER > WHEN BANK MAY CHARGE CUSTOMER'S ACCOUNT.
Short Summary
This legal document, found in the Texas Statutes under the Business and Commerce Code, specifically in the Uniform Commercial Code section on Bank Deposits and Collections, governs the relationship between a payor bank and its customer. According to this document, a bank has the authority to charge a customer’s account for an item that is properly payable from that account, even if it creates an overdraft. An item is considered properly payable if it is authorized by the customer and complies with any agreement between the customer and the bank. The customer is not liable for an overdraft if they did not sign the item or benefit from its proceeds. Additionally, the bank may charge a check against the customer’s account, even if payment was made before the date of the check, unless the customer has given notice of postdating to the bank. If the bank charges the account before the stated date, it is liable for damages. Furthermore, a bank that makes payment to a holder in good faith may charge the customer’s account based on the original terms of an altered item or the terms of a completed item, unless the bank has notice of improper completion. The document does not mention any specific exemptions. Non-compliance with the provisions may result in damages for dishonor of subsequent items under Section 4.402.
Whom does it apply to?
Banks and their customers
What does it govern?
Relationship between payor bank and its customer
What are exemptions?
No exemptions are mentioned.
What are the Penalties?
Damages for dishonor of subsequent items under Section 4.402
Jurisdiction
Texas