Legal Definitions - dishonor

Dishonor is when a bank or financial institution refuses to pay an instrument, like a check, that is presented for payment or settlement. This can happen if there is a valid reason, such as fraud or forgery, or if the person who wrote the check doesn't have enough money in their account to cover it.

If a bank chooses to dishonor an instrument, they must give notice to the person who presented it. If the bank cannot provide a valid reason for dishonoring the instrument, they may be liable for damages.

Let's say you receive a check from a friend for $500. You deposit the check into your bank account, but a few days later, the bank tells you that they are dishonoring the check because your friend's account has been closed. The bank must give you notice of dishonor and explain why they are not paying the check.

Another example of dishonor could be if someone tries to cash a check that has been forged or altered. The bank may dishonor the check and refuse to pay it because it is not a valid instrument.

These examples illustrate how dishonor occurs when a bank or financial institution refuses to pay an instrument for a valid reason, and how they must provide notice to the person who presented the instrument.