(a)If an unaccepted draft is presented to
the drawee for payment or acceptance and the drawee pays or accepts the draft, (i)
the person obtaining payment or acceptance, at the time of presentment, and (ii) a
previous transferor of the draft, at the time of transfer, warrant to the drawee
making payment or accepting the draft in good faith that:
(1)The warrantor is, or was, at the time the warrantor transferred the draft, a
person entitled to enforce the draft or authorized to obtain payment or acceptance
of the draft on behalf of a person entitled to enforce the draft;
(2)The draft has not been altered;
(3)The warrantor has no knowledge that the signature of the drawer of the
draft is unauthorized; and
(4)If the draft is a demand draft, creation of the demand draft accordin
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(a) If an unaccepted draft is presented to
the drawee for payment or acceptance and the drawee pays or accepts the draft, (i)
the person obtaining payment or acceptance, at the time of presentment, and (ii) a
previous transferor of the draft, at the time of transfer, warrant to the drawee
making payment or accepting the draft in good faith that:
(1) The warrantor is, or was, at the time the warrantor transferred the draft, a
person entitled to enforce the draft or authorized to obtain payment or acceptance
of the draft on behalf of a person entitled to enforce the draft;
(2) The draft has not been altered;
(3) The warrantor has no knowledge that the signature of the drawer of the
draft is unauthorized; and
(4) If the draft is a demand draft, creation of the demand draft according to
the terms on its face was authorized by the person identified as drawer. Nothing in
this section shall be construed to impair the rights of the drawer against the
drawee.
(b) A drawee making payment may recover from any warrantor damages for
breach of warranty equal to the amount paid by the drawee less the amount the
drawee received or is entitled to receive from the drawer because of the payment.
In addition, the drawee is entitled to compensation for expenses and loss of interest
resulting from the breach. The right of the drawee to recover damages under this
subsection is not affected by any failure of the drawee to exercise ordinary care in
making payment. If the drawee accepts the draft, breach of warranty is a defense
to the obligation of the acceptor. If the acceptor makes payment with respect to the
draft, the acceptor is entitled to recover from any warrantor for breach of warranty
the amounts stated in this subsection (b).
(c) If a drawee asserts a claim for breach of warranty under subsection (a) of
this section based on an unauthorized indorsement of the draft or an alteration of
the draft, the warrantor may defend by proving that the indorsement is effective
under section 4-3-404 or 4-3-405 or the drawer is precluded under section 4-3-406 or 4-4-406 from asserting against the drawee the unauthorized indorsement or
alteration.
(d) If (i) a dishonored draft is presented for payment to the drawer or an
indorser or (ii) any other instrument is presented for payment to a party obliged to
pay the instrument, and (iii) payment is received, the following rules apply:
(1) The person obtaining payment and a prior transferor of the instrument
warrant to the person making payment in good faith that the warrantor is, or was, at
the time the warrantor transferred the instrument, a person entitled to enforce the
instrument or authorized to obtain payment on behalf of a person entitled to
enforce the instrument.
(2) The person making payment may recover from any warrantor for breach
of warranty an amount equal to the amount paid plus expenses and loss of interest
resulting from the breach.
(e) The warranties stated in subsections (a) and (d) of this section cannot be
disclaimed with respect to checks. Unless notice of a claim for breach of warranty
is given to the warrantor within thirty days after the claimant has reason to know of
the breach and the identity of the warrantor, the liability of the warrantor under
subsection (b) or (d) of this section is discharged to the extent of any loss caused by
the delay in giving notice of the claim.
(f) A cause of action for breach of warranty under this section accrues when
the claimant has reason to know of the breach.
(g) A demand draft is a check, as provided in section 4-3-104 (f).
(h) If the warranty in paragraph (4) of subsection (a) of this section is not
given by a transferor under applicable conflict of law rules, then the warranty is not
given to that transferor when that transferor is a transferee.