§ 4-4-207 — Transfer warranties

Colorado § 4-4-207

• Jurisdiction: Colorado
• Title 04: Uniform
• Art.: Bank Deposits and Collections

Text

(a) A customer or collecting bank that
transfers an item and receives a settlement or other consideration warrants to the
transferee and to any subsequent 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 (section 4-3-305 (a)) of any party that can be asserted against the warrantor;

(5) The warrantor has no knowledge of any insolvency proceeding
commenced with respect to the maker or acceptor or, in the case of an unaccepted
draft, the drawer; and

(6) If the item is a demand draft, creation of the item 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) If an item is dishonored, a customer or collecting bank transferring the
item and receiving settlement or other consideration is obliged to pay the amount
due on the item (i) according to the terms of the item at the time it was transferred,
or (ii) if the transfer was of an incomplete item, according to its terms when
completed as stated in sections 4-3-115 and 4-3-407. The obligation of a transferor
is owed to the transferee and to any subsequent collecting bank that takes the item
in good faith. A transferor cannot disclaim its obligation under this subsection (b) by
an indorsement stating that it is made without recourse or otherwise disclaiming
liability.

(c) A person to whom the warranties under subsection (a) of this section are
made and who took the item in good faith may recover from the warrantor as
damages for breach of warranty an amount equal to the loss suffered as a result of
the breach, but not more than the amount of the item plus expenses and loss of
interest incurred as a result of the breach.

(d) The warranties stated in subsection (a) 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 warrantor is discharged to the
extent 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 when
the claimant has reason to know of the breach.

(f) If the warranty in paragraph (6) of subsection (a) of this section is not
given by a transferor or collecting bank under applicable conflict of law rules, then
the warranty is not given to that transferor when that transferor is a transferee, nor
to any prior collecting bank of that transferee.

Legislative History

Source: L. 94: Entire article amended with relocations, p. 887, � 2, effective January 1, 1995. L. 2001: (a) amended and (f) added, p. 868, � 6, effective August 8.