70A-4-207 - Transfer warranties.
70A-4-207. Transfer warranties.
(1) A customer or collecting bank that transfers an item and receives a settlement or otherconsideration warrants to the transferee and to any subsequent collecting bank that:
(a) the warrantor is a person entitled to enforce the item;
(b) all signatures on the item are authentic and authorized;
(c) the item has not been altered;
(d) the item is not subject to a defense or claim in recoupment, Section 70A-3-305, of anyparty that can 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 item is a demand draft, creation of the item according to the terms on its facewas authorized by the person identified as drawer.
(2) If an item is dishonored, a customer or collecting bank transferring the item andreceiving settlement or other consideration is obliged to pay the amount due on the item accordingto the terms of the item at the time it was transferred, or if the transfer was of an incomplete item,according to its terms when completed as stated in Sections 70A-3-115 and 70A-3-407. Theobligation of a transferor is owed to the transferee and to any subsequent collecting bank thattakes the item in good faith. A transferor cannot disclaim its obligation under this subsection byan indorsement stating that it is made "without recourse" or otherwise disclaiming liability.
(3) A person to whom the warranties under Subsection (1) are made and who took theitem in good faith may recover from the warrantor, as damages for breach of warranty, an amountequal to the loss suffered as a result of the breach, but not more than the amount of the item plusexpenses and loss of interest incurred as a result of the breach.
(4) 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 warrantor isdischarged to the extent of any loss caused by the delay in giving notice of the claim.
(5) A cause of action for breach of warranty under this section accrues when the claimanthas reason to know of the breach.
(6) If the warranty in Subsection (1)(f) is not given by a transferor or collecting bankunder applicable conflict of law rules, the warranty is not given to that transferor when thattransferor is a transferee nor to any prior collecting bank of that transferee.
Amended by Chapter 60, 1998 General Session