§ 34.1-3-416 — Transfer warranties

(a) A person who transfers an instrument for consideration
warrants to the transferee and, if the transfer is by
indorsement, to any subsequent transferee that:
(i) The warrantor is a person entitled to enforce the
instrument;
(ii) All signatures on the instrument are authentic
and authorized;
(iii) The instrument has not been altered;
(iv) The instrument is not subject to a defense or
claim in recoupment of any party which can be asserted against
the warrantor; and
(v) 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) A person to whom the warranties under subsection (a)
are made and who took the instrument 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 instrument plus expenses and loss of
interest incurred as a result of the breach.
(c) The warranties stated in subsection (a) 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 liability of the warrantor under
subsection (b) is discharged to the extent of any loss caused by
the delay in giving notice of the claim.
(d) A cause of action for breach of warranty under this
section accrues when the claimant has reason to know of the
breach.