Warranty Liability

Question 1

Warranty Liability

Answer 1

Invoked to get reimbursed
Warranties are implied
Arise from transfer or presentment
Possession not necessary 
Survives final payment

Question 2

Who makes Transfer Warranties

Answer 2

Transferor who receives consideration; no gift

Question 3

To whom are transfer warranties made

Answer 3

Immediate transferee
Subsequent transferees if indorsed
Drawee and maker can never sue for breach of transfer warranty

Question 4

What are the Transfer Warranties

Answer 4

Transferor entitled to enforce
All signatures are authentic and authorized
No alterations
No good defenses against Transferor
No knowledge of insolvency proceedings

Question 5

Disclaiming Warranties

Answer 5

Checks- cannot disclaim

Non-Checks- may disclaim

Question 6

Presentment Warranties

Answer 6

Made on presentment

Question 7

Who makes presentment warranties

Answer 7

Presenter and Previous Transferors

Question 8

Who are presentment warranties made to

Answer 8

Made to parties who pay in good faith, that is, maker, drawee, acceptor

Question 9

Warranties when unaccepted draft presented to drawee

Answer 9

Warrantor entitled to enforce draft or obtain payment
No alteration
No knowledge of unauthorized drawer’s signature

Question 10

Warranty v Indorsers Contract

Answer 10

If Plaintiff is the Holder: If the payor has not paid the instrument (e.g., a check bounces or a promissory note is not paid by the maker), then the holder will sue the indorser on the indorser’s contract.

If Plaintiff is Payor: If the payor has paid and later discovers the payor should not have paid (e.g., the check was forged or the note was altered), then the payor will attempt to sue the indorser for breach of warranty (transfer or presentment, as appropriate under the facts).