70A-3-416 - Transfer warranties.
70A-3-416. Transfer warranties.
(1) A person who transfers an instrument for consideration warrants to the transferee and,if the transfer is by indorsement, to any subsequent transferee that:
(a) the warrantor is a person entitled to enforce the instrument;
(b) all signatures on the instrument are authentic and authorized;
(c) the instrument has not been altered;
(d) the instrument is not subject to a defense or claim in recoupment of any party whichcan be asserted against the warrantor;
(e) the warrantor has no knowledge of any insolvency proceeding commenced withrespect to the maker or acceptor or, in the case of an unaccepted draft, the drawer; and
(f) if the instrument is a demand draft, creation of the instrument according to the termson its face was authorized by the person identified as drawer.
(2) A person to whom the warranties under Subsection (1) are made and who took theinstrument in good faith may recover from the warrantor, as damages for breach of warranty, anamount equal to the loss suffered as a result of the breach, but not more than the amount of theinstrument plus expenses and loss of interest incurred as a result of the breach.
(3) The warranties stated in Subsection (1) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 days after theclaimant has reason to know of the breach and the identity of the warrantor, the liability of thewarrantor under Subsection (2) is discharged to the extent of any loss caused by the delay ingiving notice of the claim.
(4) A cause of action for breach of warranty under this section accrues when the claimanthas reason to know of the breach.
(5) If the warranty in Subsection (1)(f) is not given by a transferor under applicableconflict of law rules, the warranty is not given to that transferor when that transferor is atransferee.
Amended by Chapter 60, 1998 General Session