§ 6A-4-207 - Transfer warranties.
SECTION 6A-4-207
§ 6A-4-207 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 inrecoupment (§ 6A-3-305(a)) of any party that can be asserted against thewarrantor; and
(5) The warrantor has no knowledge of any insolvencyproceeding commenced with respect to the maker or acceptor or, in the case ofan unaccepted draft, the drawer.
(b) If an item is dishonored, a customer or collecting banktransferring the item and receiving settlement or other consideration isobliged to pay the amount due on the item (i) according to the terms of theitem at the time it was transferred, or (ii) if the transfer was of anincomplete item, according to its terms when completed as stated in§§ 6A-3-115 and 6A-3-407. The obligation of a transferor is owed tothe transferee and to any subsequent collecting bank that takes the item ingood faith. A transferor cannot disclaim its obligation under this subsectionby an indorsement stating that it is made "without recourse" or otherwisedisclaiming liability.
(c) A person to whom the warranties under subsection (a) aremade and who took the item in good faith may recover from the warrantor asdamages for breach of warranty an amount equal to the loss suffered as a resultof the breach, but not more than the amount of the item plus expenses and lossof interest incurred as a result of the breach.
(d) The warranties stated in subsection (a) cannot bedisclaimed with respect to checks. Unless notice of a claim for breach ofwarranty is given to the warrantor within 30 days after the claimant has reasonto 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 ofthe claim.
(e) A cause of action for breach of warranty under thissection accrues when the claimant has reason to know of the breach.