47-3417

47-3417. Presentment warranties

A. If an unaccepted draft is presented to the drawee for payment or acceptance and
the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the
time of presentment, and a previous transferor of the draft, at the time of transfer,
warrant to the drawee making payment or accepting 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; and

3. The warrantor has no knowledge that the signature of the drawer of the draft is
unauthorized.

B. A drawee making payment may recover from any 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, breach of warranty is a defense to the obligation of the acceptor. If
the acceptor makes payment with respect to the draft, the acceptor is entitled to recover
from any 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 of this
section based on an unauthorized indorsement of the draft or an alteration of the draft,
the warrantor may defend by proving that the indorsement is effective under section
47-3404 or 47-3405 or the drawer is precluded under section 47-3406 or 47-4406 from
asserting against the drawee the unauthorized indorsement or alteration.

D. If a dishonored draft is presented for payment to the drawer or an indorser or
any other instrument is presented for payment to a party obliged to pay the instrument,
and payment is received, the following rules apply:

1. The person obtaining payment and a prior transferor of the instrument warrant to
the person making payment in good faith that the warrantor is, or was, at the time the
warrantor transferred the instrument, a person entitled to enforce the instrument or
authorized to obtain payment on behalf of a person entitled to enforce the instrument.

2. 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 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 liability of the warrantor under subsection
B or D of this section 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.