70A-4-208 - Presentment warranties.
70A-4-208. Presentment warranties.
(1) If an unaccepted draft is presented to the drawee for payment or acceptance and thedrawee pays or accepts the draft, the person obtaining payment or acceptance, at the time ofpresentment, and a previous transferor of the draft, at the time of transfer, warrant to the draweethat pays or accepts the draft in good faith that:
(a) the warrantor is, or was, at the time the warrantor transferred the draft, a personentitled to enforce the draft or authorized to obtain payment or acceptance of the draft on behalfof a person entitled to enforce the draft;
(b) the draft has not been altered;
(c) the warrantor has no knowledge that the signature of the purported drawer of the draftis unauthorized; and
(d) if the draft is a demand draft, creation of the demand draft according to the terms onits face was authorized by the person identified as drawer.
(2) A drawee making payment may recover from a warrantor damages for breach ofwarranty equal to the amount paid by the drawee less the amount the drawee received or isentitled to receive from the drawer because of the payment. In addition, the drawee is entitled tocompensation for expenses and loss of interest resulting from the breach. The right of the draweeto recover damages under this subsection is not affected by any failure of the drawee to exerciseordinary care in making payment. If the drawee accepts the draft:
(a) breach of warranty is a defense to the obligation of the acceptor; and
(b) if the acceptor makes payment with respect to the draft, the acceptor is entitled torecover from a warrantor for breach of warranty the amounts stated in this subsection.
(3) If a drawee asserts a claim for breach of warranty under Subsection (1) based on anunauthorized indorsement of the draft or an alteration of the draft, the warrantor may defend byproving that the indorsement is effective under Section 70A-3-404 or 70A-3-405, or the drawer isprecluded under Section 70A-3-406 or 70A-4-406 from asserting against the drawee theunauthorized indorsement or alteration.
(4) If a dishonored draft is presented for payment to the drawer or an indorser, or anyother item is presented for payment to a party obliged to pay the item, and the item is paid, theperson obtaining payment and a prior transferor of the item warrant to the person making paymentin good faith that the warrantor is, or was, at the time the warrantor transferred the item, a personentitled to enforce the item or authorized to obtain payment on behalf of a person entitled toenforce the item. The person making payment may recover from any warrantor for breach ofwarranty an amount equal to the amount paid plus expenses and loss of interest resulting from thebreach.
(5) The warranties stated in Subsections (1) and (4) cannot be disclaimed with respect tochecks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 daysafter the claimant has reason to know of the breach and the identity of the warrantor, thewarrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(6) A cause of action for breach of warranty under this section accrues when the claimanthas reason to know of the breach.
(7) A demand draft is a check, as provided in Section 70A-3-104.
(8) If the warranty in Subsection (1)(d) 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