Wrongful Dishonor Law and Legal Definition
Wrongful dishonor means a refusal or failure to honor within a statutory period, a negotiable instrument or bill of exchange that is properly endorsed and presented for payment. Generally the statutory period for honoring a negotiable instrument or bill of exchange is until midnight of the day of presentment. In cases where the person presenting the check suffers financial loss because of the bank's refusal to honor an otherwise payable check, the bank can be held liable to its customer for damages. However the customer must prove the financial loss.
In Malak v. First Nat'l Bank, 195 Ga. App. 105 (Ga. Ct. App. 1990), the court observed that “Wrongful dishonor may be considered a tort.”
Further, the court in Yacht Club Sales & Serv. v. First Nat'l Bank, 101 Idaho 852 (Idaho 1980), observed that “"Mistaken dishonor" means a wrongful dishonor done erroneously or unintentionally. Dishonors resulting from inadvertent bookkeeping errors and other unintentional employee errors would be mistaken dishonors. On the other hand, where a dishonor is caused by a setoff or charge made by a bank under an erroneous belief that it had a legal right to do so, the wrongful dishonor resulting from the improper setoff or charge is not classified as mistaken.”