§ 10:4-207 — Transfer warranties

§4-207. Transfer warranties
(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 (R.S. 10:3-305(a)) of
any party that can be asserted against the warrantor; and
(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.
(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 R.S. 10:3-115 and
10:3-407. 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 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.
If the person to whom the warranties are made sends written notice by certified or registered
mail or commercial courier to the warrantor of its claim for breach of warranty and the
warrantor fails to pay the claim within thirty days after receiving the notice, the expenses of
the person to whom the warranties are made shall include reasonable attorney fees.
(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.

Legislative History

Acts 1992, No. 1133, §4, eff. July 1, 1993; Acts 1993, No. 948, §10, eff. Jan. 1, 1994; Acts 2024, No. 208, §1.