§490:3-417  Presentment warranties.  (a) 

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

the drawee pays or accepts the draft:

     (1)  The person obtaining payment or acceptance, at

the time of presentment; and

     (2)  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:

         (A)  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;

         (B)  The draft has not been altered;

         (C)  The warrantor has no knowledge that the

signature of the drawer of the draft is unauthorized; and

         (D)  If the draft is a demand draft, creation

of the demand 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 490:3-404 or 490:3-405 or the drawer is

precluded under section 490:3-406 or 490:4-406 from asserting against the

drawee the unauthorized indorsement or alteration.

     (d)  If:

     (1)  A dishonored draft is presented for payment to

the drawer or an indorser; or

     (2)  Any other instrument is presented for payment to

a party obliged to pay the instrument; and

     (3)  Payment is received, the following rules apply:

         (A)  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; and

         (B)  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) 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) 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

section 490:3-104(f). [L 1991, c 118, pt of §1; am L 1998, c 241, §4]