J. MILLARD TAWES, Governor                        871

(b) any other properly payable item unless within the time allowed
for acceptance or payment of that item the bank either accepts or
pays the item or returns it and accompanying documents.

4—303. When Items Subject to Notice, Stop-Order, Legal Process
or Set-Off; Order in Which Items May be Charged or Certified.

(1)  Any knowledge, notice or stop-order received by, legal process
served upon or set-off exercised by a payor bank, whether or not
effective under other rules of law to terminate, suspend or modify
the bank's right or duty to pay an item or to charge its customer's
account for the item, comes too late to so terminate, suspend or
modify such right or duty if the knowledge, notice, stop-order or
legal process is received or served and a reasonable time for the bank
to act thereon expires or the set-off is exercised after the bank has
done any of the following:

(a)  accepted or certified the item;

(b)  paid the item in cash;

(c)  settled for the item without reserving a right to revoke the set-
tlement and without having such right under statute, clearing house
rule or agreement;

(d)  completed the process of posting the item to the indicated
account of the drawer, maker or other person to be charged there-
with or otherwise has evidenced by examination of such indicated
account and by action its decision to pay the item; or

(e)  become accountable for the amount of the item under Sub-
section (1) (d) of Section 4—213 and Section 4—302 dealing with
the payor bank's responsibility for late return of items.

(2)  Subject to the provisions of Sub-section (1) items may be
accepted, paid, certified or charged to the indicated account of its
customer in any order convenient to the bank.

Part 4
Relationship Between Payor Bank

and Its Customer
4—401. When Bank May Charge Customer's Account.

(1)  As against its customer, a bank may charge against his ac-
count any item which is otherwise properly payable from that account
even though the charge creates an overdraft.

(2)  A bank which in good faith makes payment to a holder may
charge the indicated account of its customer according to

(a)  the original tenor of his altered item; or

(b)   the tenor of his completed item, even though the bank knows
the item has been completed unless the bank has notice that the com-
pletion was improper.

4—402. Bank's Liability to Customer for Wrongful Dishonor.

A payor bank is liable to its customer for damages proximately
caused by the wrongful dishonor of an item. When the dishonor