General Provisions for Bank Deposits and Collections

In the California Commercial Code, Division 4, Chapter 1, there are general provisions and definitions related to bank deposits and collections. Section 4101 names this division as the Uniform Commercial Code—Bank Deposits and Collections.

Section 4102 provides that, to the extent that items within this division are also within Divisions 3, they are subject to those divisions. If there is conflict, this division governs Division 3 (commencing with Section 3101), but Division 8 (commencing with Section 8101) governs this division.

The liability of a bank for action or nonaction with respect to an item handled by it for purposes of presentment, payment, or collection is governed by the law of the place where the bank is located.

Section 4103 specifies that the effect of the provisions of this division may be varied by agreement, but the parties to the agreement cannot disclaim a bank’s responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank’s responsibility is to be measured if those standards are not manifestly unreasonable.

In addition, the specification or approval of certain procedures by this division is not disapproval of other procedures that may be reasonable under the circumstances. The measure of damages for failure to exercise ordinary care in handling an item is the amount of the item reduced by an amount that could not have been realized by the exercise of ordinary care. If there is also bad faith it includes any other damages the party suffered as a proximate consequence.

Section 4104 provides the following definitions for this division: “account,” “afternoon,” “banking day,” “clearinghouse,” “customer,” “documentary draft,” “draft,” “drawee,” “item,” “midnight deadline,” “settle,” “suspends payments,” “agreement for electronic presentment,” “bank,” “collecting bank,” “depositary bank,” “intermediary bank,” “payor bank,” “presenting bank,” “presentment notice,” “acceptance,” “alteration,” “cashier’s check,” “certificate of deposit,” “certified check,” “check,” “control,” “holder in due course,” “instrument,” “notice of dishonor,” “order,” “ordinary care,” “person entitled to enforce,” “presentment,” “promise,” “prove,” “teller’s check,” and “unauthorized signature.”

Section 4105 provides definitions for the following terms: “bank,” “depositary bank,” “payor bank,” “intermediary bank,” “collecting bank,” and “presenting bank.”

Section 4106 specifies that, if an item states that it is “payable through” a bank identified in the item, then certain provisions apply. If an item states that it is “payable at” a bank identified in the item, then specified items apply.

Section 4107 provides that a branch or separate office of a bank is a separate bank for the purpose of computing the time within which and determining the place at or to which action may be taken or notice or orders are to be given.

Section 4108 states that, for the purpose of allowing time to process items, prove balances, and make the necessary entries on its books to determine its position for the day, a bank may fix an afternoon hour of 2 p.m. or later as a cutoff hour for the handling of money and items and the making of entries on its books. And, an item or deposit of money received on any day after a cutoff hour so fixed or after the close of the banking day may be treated as being received at the opening of the next banking day.

Section 4109 provides that a collecting bank in a good faith effort to secure payment of a specific item drawn on a payor other than a bank, and with or without the approval of any person involved, may waive, modify, or extend time limits imposed or permitted by this code for a period not exceeding two additional banking days without discharge liability to its transferor or a prior party.

Section 4110 defines the phrase “agreement for electronic presentment.” Presentment of an item pursuant to an agreement for presentment is made when the presentment notice is received. If presentment is made by presentment notice, a reference to “item” or “check” in this division means the presentment notice unless the context otherwise indicates.

Section 4111 states that an action to enforce an obligation, duty, or right arising under this division must be commenced within three years after the cause of action accrues.