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The Vermont Statutes Online



Title

09A

:
Uniform Commercial Code






Chapter

003

:
Commercial Paper











 

§

3-416. Transfer warranties

(a) A person who

transfers an instrument for consideration warrants to the transferee and, if

the transfer is by indorsement, to any subsequent transferee that:

(1) the

warrantor is a person entitled to enforce the instrument;

(2) all

signatures on the instrument are authentic and authorized;

(3) the

instrument has not been altered;

(4) the

instrument is not subject to a defense or claim in recoupment of any party

which can be asserted against the warrantor;

(5) the warrantor

has no knowledge of any insolvency proceeding commenced with respect to the

maker or acceptor or, in the case of an unaccepted draft, the drawer; and

(6) if the

instrument is a demand draft, creation of the instrument according to the terms

on its face was authorized by the person identified as drawer.

(b) A person to

whom the warranties under subsection (a) of this section are made and who took

the instrument in good faith may recover from the warrantor as damages for

breach of warranty an amount equal to the loss suffered as a result of the

breach, but not more than the amount of the instrument plus expenses and loss

of interest incurred as a result of the breach.

(c) The

warranties stated in subsection (a) 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) of this section is discharged to the extent of any loss caused

by the delay in giving notice of the claim.

(d) A cause of

action for breach of warranty under this section accrues when the claimant has

reason to know of the breach.

(e) If the

warranty in paragraph (a)(6) 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.), § 3.)