Wrongful Dishonor
Candlefocus EditorWrongful dishonor is a banking term which refers to the failure of a bank to fulfill its obligations when it comes to honoring a check or other form of payment due to another party. A wrongful dishonor will typically occur when funds that were available to the payor at the time the payment instrument was issued, have not been successfully transferred to the payee's account. In most cases, wrongful dishonors happen because a check wasn‟t properly authorized or the bank was otherwise not paid for the check.
Wrongful dishonor is a serious breach of contract. When wrongful dishonor happens, it will typically give rise to damages, costs and expenses. The law gives the victim of wrongful dishonor a legal remedy to recover their loses from the payor. Victims of wrongful dishonor may also be able to sue the bank that wrongfully dishonored the payment instrument for a breach of contract.
When wrongful dishonor occurs, the payee may bring a legal claim against the payor. For example, if the payment instrument was issued with sufficient funds to cover the amount, yet it was wrongfully dishonored, the payee may file a suit to recover the unpaid amount, any damages suffered as a result of the wrongful dishonor, and any costs or fees associated with having to take legal action.
The law also provides that if the wrongful dishonor was caused by a bank, the payee may have a claim against the bank under a breach of contract theory. The bank could be found to have breached its contract with the payee by failing to honor the payment instrument. In such cases, the payee may be able to recover their damages, costs and expenses from the bank.
The law may also provide for punitive damages on top of any actual damages if the wrongful dishonor was intentional or reckless on the part of the payor or bank. Wrongful dishonor is a serious matter and should always be addressed with the necessary legal action to hold the payor and bank accountable for their breach of contract obligations.