§ 4-207 — Warranties of Customer and Collecting Bank on Transfer or Presentment of Items; Time for Claims

Section 4--207. Warranties of Customer and Collecting Bank on Transfer\n or Presentment of Items; Time for Claims.\n (1) Each customer or collecting bank who obtains payment or acceptance\nof an item and each prior customer and collecting bank warrants to the\npayor bank or other payor who in good faith pays or accepts the item\nthat\n (a) he has a good title to the item or is authorized to obtain\n payment or acceptance on behalf of one who has a good title;\n and\n (b) he has no knowledge that the signature of the maker or drawer\n is unauthorized, except that this warranty is not given by\n any customer or collecting bank that is a holder in due\n course and acts in good faith\n (i) to a maker with respect to the maker's own signature; or\n (ii) to a drawer with respect to the drawer's own signature,\n whether or not the drawer is also the drawee; or\n (iii) to an acceptor of an item if the holder in due course\n took the item after the acceptance or obtained the\n acceptance without knowledge that the drawer's signature\n was unauthorized; and\n (c) the item has not been materially altered, except that this\n warranty is not given by any customer or collecting bank that\n is a holder in due course and acts in good faith\n (i) to the maker of a note; or\n (ii) to the drawer of a draft whether or not the drawer is\n also the drawee; or\n (iii) to the acceptor of an item with respect to an alteration\n made prior to the acceptance if the holder in due course\n took the item after the acceptance, even though the\n acceptance provided "payable as originally drawn" or\n equivalent terms; or\n (iv) to the acceptor of an item with respect to an alteration\n made after the acceptance.\n (2) Each customer and collecting bank who transfers an item and\nreceives a settlement or other consideration for it warrants to his\ntransferee and to any subsequent collecting bank who takes the item in\ngood faith that\n (a) he has a good title to the item or is authorized to obtain\n payment or acceptance on behalf of one who has a good title\n and the transfer is otherwise rightful; and\n (b) all signatures are genuine or authorized; and (c) the item\n has not been materially altered; and\n (d) no defense of any party is good against him; and\n (e) he has no knowledge of any insolvency proceeding instituted\n with respect to the maker or acceptor or the drawer of an\n unaccepted item.\nIn addition each customer and collecting bank so transferring an item\nand receiving a settlement or other consideration engages that upon\ndishonor and any necessary notice of dishonor and protest he will take\nup the item.\n (3) The warranties and the engagement to honor set forth in the two\npreceding subsections arise notwithstanding the absence of indorsement\nor words of guaranty or warranty in the transfer or presentment and a\ncollecting bank remains liable for their breach despite remittance to\nits transferor. Damages for breach of such warranties or engagement to\nhonor shall not exceed the consideration received by the customer or\ncollecting bank responsible plus finance charges and expenses related to\nthe item, if any\n (4) Unless a claim for breach of warranty under this section is made\nwithin a reasonable time after the person claiming learns of the breach,\nthe person liable is discharged to the extent of any loss caused by the\ndelay in making claim.\n