47-3416

47-3416. 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:

1. The warrantor is a person entitled to enforce the instrument;

2. All signatures on the instrument are authentic and authorized;

3. The instrument has not been altered;

4. The instrument is not subject to a defense or claim in recoupment of any party
which 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. 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 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.