KRS 355.4-301: Deferred posting -- Recovery of payment by return of items -- Time of

dishonor -- Return of items by payor bank.

(1) If a payor bank settles for a demand item other than a documentary draft presented

otherwise than for immediate payment over the cou nter before midnight of the

banking day of receipt, the payor bank may revoke the settlement and recover the

settlement if, before it has made final payment and before its midnight deadline, it:

(a) Returns the item; or

(b) Sends a record providing notice of dishonor or nonpayment if the item is

unavailable for return.

(2) If a demand item is received by a payor bank for credit on its books, it may return

the 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amount thereof withdrawn by its customer, if it acts within the time limit and in the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 subsection (1) of this section.

(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 no tice sent in accordance with this

section.

(4) An item is returned:

(a) As to an item presented 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 clearing-house rules; or

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

transferor or pursuant to instructions.