Legal Definitions - notice of dishonor

A notice of dishonor is a notification sent to the indorser of a financial instrument, such as a check or promissory note, informing them that the payment or acceptance of the instrument has been refused. This notice is a requirement for the indorser's secondary liability, along with presentment and actual dishonor.

For example, if John writes a check to Jane, and Jane tries to cash it but the bank refuses to honor it due to insufficient funds, the bank will send a notice of dishonor to John, informing him that his check was not accepted. John, as the indorser, is then responsible for paying the amount of the check to Jane.

Another example would be if a company issues a promissory note to a supplier, promising to pay a certain amount by a specific date. If the company fails to make the payment on time, the supplier can send a notice of dishonor to the company, informing them that the promissory note was not accepted. The company, as the indorser, is then responsible for paying the amount owed to the supplier.