Warranty Liability

Question 1

Who makes a warranty?

Answer 1

Any transferor who receives consideration

Question 2

To whom are transfer warranties made?

Answer 2

(1) Immediate transferee and (2) All subsequent transferees if the transfer is by indorsement
* For banks, liability runs to any subsequent collecting bank, even without indorsement
* Drawees and makers can never sue for breach of transfer warranty

Question 3

What are the transfer warranties?

Answer 3

1. Warrantor is entitled to enforce the instrument
2. All signatures are authentic and authorized
3. Instrument has not been altered
4. No defense or claim of any party is good against the transferor
5. Transferor has no knowledge of any insolvency proceedings against maker, acceptor, or drawer of unaccpeted instrument

Question 4

May a party disclaim transfer warranties?

Answer 4

Yes, other than on checks, by placing words like “without warranties”

Question 5

Can a plaintiff have a claim in presentment and transfer warranty against the same defendant?

Answer 5

No–these warranties are made to different people

Question 6

To whom is a presentment warranty made to?

Answer 6

Parties who pay in good faith–a maker, drawee, or acceptor

Question 7

What are the warranties when an unaccepted draft is presented?

Answer 7

(1) Warrantor entitled to enforce the draft (“good title”)
(2) Draft has not been altered
(3) Warrantor has no knowledge that the drawer’s signature is unauthorized

Question 8

What warranties are met when instruments or items other than unaccpeted draft are presented?

Answer 8

Only that the warrantor is entitled to enforce

Question 9

How do you know whether the plaintiff should bring suit against the indorser for breach of warranty or for breach of the indorser’s contract?

Answer 9

• If plaintiff is holder, then will sue indorser on indorser’s contract
• If plaintiff is payor then will sue indorser for breach of warranty