dishonor - Return of items by payor bank. 1. If a payor bank settles for a demand item other than a documentary draft presented otherwise than for immediate payment over the counter before midnight of the banking day of receipt, the payor bank may revoke the settlement and recover any settlement if before it has made final payment and before its midnight deadline it: a. Returns the item. b. Sends written notice of dishonor or nonpayment if the item is unavailable for return. 2. If a demand item is received by a payor bank for credit on its books, it may return that item or send notice of dishonor and may revoke any credit given or recover the amount thereof withdrawn by its customer, if it acts within the time limit and in the manner specified in subsection 1. 3. Unless previous notice of dishonor has been sent, an item is dishonored at the time when for purposes of dishonor it is returned or notice sent under this section. 4. An item is returned: a. As to an item presented through a clearinghouse, when it is delivered to the presenting or last collecting bank or to the clearinghouse or is sent or delivered under clearinghouse rules. b. In all other cases, when it is sent or delivered to the bank's customer or transferor or under instructions.
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