Definitions and index of definitions.
(a) In this article, unless the context otherwise requires:
(1) "Account" means any deposit or credit account with a bank, including
a demand, time, savings, passbook, share draft, or like account, other than
an account evidenced by a certificate of deposit;
(2) "Afternoon" means the period of a day between noon and midnight;
(3) "Banking day" means that part of any day on which a bank is open
to the public for carrying on substantially all of its banking functions but,
for purposes of a bank's midnight deadline, shall not include Saturday, Sunday,
or any holiday when the federal reserve banks are not performing check clearing
(4) "Clearinghouse" means an association of banks or other payors regularly
(5) "Customer" means a person having an account with a bank or for whom
a bank has agreed to collect items, including a bank that maintains an account
at another bank;
(6) "Documentary draft" means a draft to be presented for acceptance
or payment if specified documents, certificated securities (section 8-102)
or instructions for uncertificated securities (section 8-102), or other certificates,
statements, or the like are to be received by the drawee or other payor before
acceptance or payment of the draft;
(7) "Draft" means a draft as defined in section 3-104 or an item, other
than an instrument, that is an order;
(8) "Drawee" means a person ordered in a draft to make payment;
(9) "Item" means an instrument or a promise or order to pay money handled
by a bank for collection or payment. The term does not include a payment order
governed by article 4A or a credit or debit card slip;
(10) "Midnight deadline" with respect to a bank is midnight on its next
banking day following the banking day on which it receives the relevant item
or notice or from which the time for taking action commences to run, whichever
(11) "Settle" means to pay in cash, by clearinghouse settlement, in
a charge or credit or by remittance, or otherwise as agreed. A settlement
may be either provisional or final;
(12) "Suspends payments" with respect to a bank means that it has been
closed by order of the supervisory authorities, that a public officer has
been appointed to take it over, or that it ceases or refuses to make payments
in the ordinary course of business.
(b) Other definitions applying to this article and the sections in which
they appear are:
|"Agreement for electronic presentment".
(c) "Control" as provided in section 7-106 and the following definitions
in other articles apply to this article:
|"Certificate of deposit".
|"Holder in due course".
|"Notice of dishonor".
|"Person entitled to enforce".
(d) In addition article 1 contains general definitions and principles
of construction and interpretation applicable throughout this article.
Source:Laws 1963, c. 544, Art. IV, § 4-104, p. 1812; Laws 1991, LB 161, § 75; Laws 1994, LB 1015, § 1; Laws 1995, LB 97, § 3; Laws 2005, LB 570, § 51.
Generally, under former subsection (1)(e) of this section, payees of
a cashier's check are not "customers." Hecker v. Ravenna Bank, 237 Neb. 810,
468 N.W.2d 88 (1991).
1. Paragraph (a)(1): "Account" is defined to include both asset accounts
in which a customer has deposited money and accounts from which a customer
may draw on a line of credit. The limiting factor is that the account must
be in a bank.
2. Paragraph (a)(3): "Banking day". Under this definition that part
of a business day when a bank is open only for limited functions, e.g., to
receive deposits and cash checks, but with loan, bookkeeping, and other departments
closed, is not part of a banking day.
3. Paragraph (a)(4): "Clearinghouse".
Occasionally express companies, governmental agencies, and other nonbanks
deal directly with a clearinghouse; hence the definition does not limit the
term to an association of banks.
4. Paragraph (a)(5): "Customer". It is to be noted that this term includes
a bank carrying an account with another bank as well as the more typical nonbank
customer or depositor.
5. Paragraph (a)(6): "Documentary draft" applies even though the documents
do not accompany the draft but are to be received by the drawee or other payor
before acceptance or payment of the draft. Documents may be either in electronic
or tangible form. See article 5, section 5-102, comment 2 and article 1, section
1-201 (definition of "document of title").
6. Paragraph (a)(7): "Draft" is defined in section 3-104 as a form of
instrument. Since article 4 applies to items that may not fall within the
definition of instrument, the term is defined here to include an item that
is a written order to pay money, even though the item may not qualify as an
instrument. The term "order" is defined in section 3-103.
7. Paragraph (a)(8): "Drawee" is defined in section 3-103 in terms of
an article 3 draft which is a form of instrument. Here "drawee" is defined
in terms of an article 4 draft which includes items that may not be instruments.
8. Paragraph (a)(9): "Item" is defined broadly to include an instrument,
as defined in section 3-104, as well as promises or orders that may not be
within the definition of "instrument". The terms "promise" and "order" are
defined in section 3-103. A promise is a written undertaking to pay money.
An order is a written instruction to pay money. But see section 4-110(c).
Since bonds and other investment securities under article 8 may be within
the term "instrument" or "promise", they are items and when handled by banks
for collection are subject to this article. See comment 1 to section 4-102.
The functional limitation on the meaning of this term is the willingness of
the banking system to handle the instrument, undertaking, or instruction for
collection or payment.
9. Paragraph (a)(10): "Midnight deadline". The use of this phrase is
an example of the more mechanical approach used in this article. Midnight
is selected as a termination point or time limit to obtain greater uniformity
and definiteness than would be possible from other possible terminating points,
such as the close of the banking day or business day.
10. Paragraph (a)(11): The term "settle" has substantial importance
throughout article 4. In the American Bankers Association Bank Collection
Code, in deferred posting statutes, in Federal Reserve regulations and operating
circulars, in clearinghouse rules, in agreements between banks and customers,
and in legends on deposit tickets and collection letters, there is repeated
reference to "conditional" or "provisional" credits or payments. Tied in with
this concept of credits or payments being in some way tentative, has been
a related but somewhat different problem as to when an item is "paid" or "finally
paid" either to determine the relative priority of the item as against attachments,
stop-payment orders, and the like or in insolvency situations. There has been
extensive litigation in the various states on these problems. To a substantial
extent the confusion, the litigation, and even the resulting court decisions
fail to take into account that in the collection process some debits or credits
are provisional or tentative, and others are final and that very many debits
or credits are provisional or tentative for awhile but later become final.
Similarly, some cases fail to recognize that within a single bank, particularly
a payor bank, each item goes through a series of processes and that in a payor
bank most of these processes are preliminary to the basic act of payment or
The term "settle" is used as a convenient term to characterize a broad
variety of conditional, provisional, tentative, and also final payments of
items. Such a comprehensive term is needed because it is frequently difficult
or unnecessary to determine whether a particular action is tentative or final
or when a particular credit shifts from the tentative class to the final class.
Therefor, its use throughout the article indicates that in that particular
context it is unnecessary or unwise to determine whether the debit or the
credit or the payment is tentative or final. However, if qualified by the
adjective "provisional" its tentative nature is intended, and if qualified
by the adjective "final" its permanent nature is intended.
Examples of the various types of settlement contemplated by the term
include payments in cash; the efficient but somewhat complicated process of
payment through the adjustment and offsetting of balances through clearinghouses;
debit or credit entries in accounts between banks; the forwarding of various
types of remittance instruments, sometimes to cover a particular item but
more frequently to cover an entire group of items received on a particular
11. Paragraph (a)(12): "Suspends payments".
This term is designed to afford an objective test to determine when
a bank is no longer operating as a part of the banking system.