§ 26-1-4-208 — Presentment warranties

(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 that pays or accepts 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
purported drawer of the draft is unauthorized; and
(4) with respect to a remotely-created consumer item, the person
on whose account the item is drawn authorized the issuance of the
item in the amount for which the item is drawn.
(b) A drawee making payment may recover from a 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:
(1) breach of warranty is a defense to the obligation of the
acceptor; and
(2) if the acceptor makes payment with respect to the draft, the
acceptor is entitled to recover from a warrantor for breach of
warranty the amounts stated in this subsection.
(c) If a drawee asserts a claim for breach of warranty under
subsection (a) based on an unauthorized endorsement of the draft or an
alteration of the draft, the warrantor may defend by proving that the
endorsement is effective under IC 26-1-3.1-404 or IC 26-1-3.1-405 or
the drawer is precluded under IC 26-1-3.1-406 or IC 26-1-4-406 from
asserting against the drawee the unauthorized endorsement or
alteration.
(d) If:
(1) a dishonored draft is presented for payment to the drawer or
an endorser; or
(2) any other item is presented for payment to a party obliged to
pay the item;
and the item is paid, the person obtaining payment and a prior
transferor of the item warrant to the person making payment in good
faith that the warrantor is, or was, at the time the warrantor transferred
the item, a person entitled to enforce the item or authorized to obtain
payment on behalf of a person entitled to enforce the item. 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) cannot be
disclaimed with respect to checks. Unless notice of a claim for breach
of warranty is given to the warrantor within thirty (30) 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.
(f) A cause of action for breach of warranty under this section
accrues when the claimant has reason to know of the breach.
Formerly: Acts 1963, c.317, s.4-208. As amended by
P.L.152-1986, SEC.216; P.L.222-1993, SEC.24; P.L.135-2009,
SEC.17.