Notice of Dishonor Law and Legal Definition

Notice of dishonor is a notice given by the holder of a bill of exchange or promissory note, to a drawer or indorser showing that acceptance or payment has been refused. Notice of dishonor is also known as certificate of protest or certificate of dishonor.

A notice of dishonour:

must convey a true description for identifying the bill;

the holder is required to give notice to all the parties to whom s/he will opt for payment; and

the notice must be given within a reasonable time after the dishonor.

A proper notice of dishonor will render the drawer and endorsers liable to the holder. According to U.C.C. § 3-503 of the Uniform Commercial Code, an agent or a bank can give notice of dishonor to customer or the other bank from whom the bank received the instrument.