8.4-207.1 - Transfer warranties.
§ 8.4-207.1. Transfer warranties.
(a) A customer or collecting bank that transfers an item and receives asettlement or other consideration warrants to the transferee and to anysubsequent collecting bank that:
(1) the warrantor is a person entitled to enforce the item;
(2) all signatures on the item are authentic and authorized;
(3) the item has not been altered;
(4) the item is not subject to a defense or claim in recoupment (§ 8.3A-305(a)) of any party that can be asserted against the warrantor; and
(5) the warrantor has no knowledge of any insolvency proceeding commencedwith respect to the maker or acceptor or, in the case of an unaccepted draft,the drawer.
(b) If an item is dishonored, a customer or collecting bank transferring theitem and receiving settlement or other consideration is obliged to pay theamount due on the item (i) according to the terms of the item at the time itwas transferred, or (ii) if the transfer was of an incomplete item, accordingto its terms when completed as stated in §§ 8.3A-115 and 8.3A-407. Theobligation of a transferor is owed to the transferee and to any subsequentcollecting bank that takes the item in good faith. A transferor cannotdisclaim its obligation under this subsection by an endorsement stating thatit is made "without recourse" or otherwise disclaiming liability.
(c) A person to whom the warranties under subsection (a) are made and whotook the item in good faith may recover from the warrantor as damages forbreach of warranty an amount equal to the loss suffered as a result of thebreach, but not more than the amount of the item plus expenses and loss ofinterest incurred as a result of the breach.
(d) The warranties stated in subsection (a) cannot be disclaimed with respectto checks. Unless notice of a claim for breach of warranty is given to thewarrantor within thirty days after the claimant has reason to know of thebreach and the identity of the warrantor, the warrantor is discharged to theextent of any loss caused by the delay in giving notice of the claim.
(e) A cause of action for breach of warranty under this section accrues whenthe claimant has reason to know of the breach.
(1992, c. 693.)