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The Vermont Statutes Online



Title

09A

:
Uniform Commercial Code






Chapter

003

:
Commercial Paper











 

§

3-417. Presentment warranties

(a) If an

unaccepted draft is presented to the drawee for payment or acceptance and the

drawee pays or accepts the draft, (i) the person obtaining payment or

acceptance, at the time of presentment, and (ii) 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;

(3) the

warrantor has no knowledge that the signature of the drawer of the draft is

unauthorized; and

(4) if the draft

is a demand draft, creation of the draft according to the terms on its face was

authorized by the person identified as drawer.

(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) 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

3-404 or 3-405 of this title or the drawer is precluded under section 3-406 or

4-406 of this title from asserting against the drawee the unauthorized

indorsement or alteration.

(d) If (i) a

dishonored draft is presented for payment to the drawer or an indorser or (ii)

any other instrument is presented for payment to a party obliged to pay the

instrument, and (iii) 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 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) 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.

(g) A demand

draft is a check as provided in subsection 3-104(k) of this title.

(h) If the

warranty in paragraph (a)(4) of this section is not given by a transferor under

applicable conflict of law rules, the warranty is not given to that transferor

when that transferor is a transferee. (Added 1993, No. 158 (Adj. Sess.), § 12,

eff. Jan. 1, 1995; amended 2003, No. 87 (Adj. Sess.), § 4.)