MARVIN MANDEL, Governor                                  201

for credit on its books it may return such item or send
notice of dishonor and may revoke any credit given or
recover the amount thereof withdrawn by its customer, if
it acts within the time limit and in the manner specified
in the preceding subsection.

(3) Unless previous notice of dishonor has been
sent an item is dishonored at the time when for purposes
of dishonor it is returned or notice sent in accordance
with this section.

(4) An item is returned:

(a)   As to an item received through a clearing
house, when it is delivered to the presenting or last
collecting bank or to the clearing house or is sent or
delivered in accordance with its rules; or

(b)    In all other cases, when it is sent or
delivered to the bank's customer or transferor or
pursuant to his instructions.

4—302. Payor bank's responsibility for late return of
item.

In the absence of a valid defense such as breach of
a presentment warranty (Subsection (1) of § 4—207),
settlement effected or the like, if an item is presented
on and received by a payor bank the bank is accountable
for the amount of

(a)   A demand item other than a documentary
draft whether properly payable or not if the bank, in any
case where it is not also the depositary bank, retains
the item beyond midnight of the banking day of receipt
without settling for it or, regardless of whether it is
also the depositary bank, does not pay or return the item
or send notice of dishonor until after its midnight
deadline; or

(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