400.4-208. Presentment warranties. - Missouri Statutes

Presentment warranties.

400.4-208. (a) If an unaccepted draft is presented to the drawee forpayment or acceptance and the drawee pays or accepts the draft, (i) theperson obtaining payment or acceptance, at the time of presentment, and(ii) a previous transferor of the draft, at the time of transfer, warrantto the drawee that pays or accepts the draft in good faith that:

(1) the warrantor is, or was, at the time the warrantor transferredthe draft, a person entitled to enforce the draft or authorized to obtainpayment or acceptance of the draft on behalf of a person entitled toenforce the draft;

(2) the draft has not been altered;

(3) the warrantor has no knowledge that the signature of thepurported drawer of the draft is unauthorized; and

(4) if the draft is a demand draft, creation of the demand draftaccording to the terms on its face was authorized by the person identifiedas drawer. Nothing in this section shall be construed to impair the rightsof the drawer against the drawee.

(b) A drawee making payment may recover from a warrantor damages forbreach of warranty equal to the amount paid by the drawee less the amountthe drawee received or is entitled to receive from the drawer because ofthe payment. In addition, the drawee is entitled to compensation forexpenses and loss of interest resulting from the breach. The right of thedrawee to recover damages under this subsection is not affected by anyfailure of the drawee to exercise ordinary care in making payment. If thedrawee accepts the draft, (i) breach of warranty is a defense to theobligation of the acceptor, and (ii) if the acceptor makes payment withrespect to the draft, the acceptor is entitled to recover from a warrantorfor breach of warranty the amounts stated in this subsection.

(c) If a drawee asserts a claim for breach of warranty undersubsection (a) based on an unauthorized endorsement of the draft or analteration of the draft, the warrantor may defend by proving that theendorsement is effective under Section 400.3-404 or 400.3-405 or the draweris precluded under Section 400.3-406 or 400.4-406 from asserting againstthe drawee the unauthorized endorsement or alteration.

(d) If (i) a dishonored draft is presented for payment to the draweror an endorser or (ii) any other item is presented for payment to a partyobliged to pay the item, and the item is paid, the person obtaining paymentand a prior transferor of the item warrant to the person making payment ingood faith that the warrantor is, or was, at the time the warrantortransferred the item, a person entitled to enforce the item or authorizedto obtain payment on behalf of a person entitled to enforce the item. Theperson making payment may recover from any warrantor for breach of warrantyan amount equal to the amount paid plus expenses and loss of interestresulting from the breach.

(e) The warranties stated in subsections (a) and (d) cannot bedisclaimed with respect to checks. Unless notice of a claim for breach ofwarranty is given to the warrantor within 30 days after the claimant hasreason to know of the breach and the identity of the warrantor, thewarrantor is discharged to the extent of any loss caused by the delay ingiving notice of the claim.

(f) A cause of action for breach of warranty under this sectionaccrues when the claimant has reason to know of the breach.

(g) A demand draft is a check, as provided in subsection (f) ofsection 400.3-104.

(h) If the warranty in paragraph (4) of subsection (a) is not givenby a transferor under applicable conflict of law rules, then the warrantyis not given to that transferor when the transferor is a transferee.

(L. 1992 S.B. 448, A.L. 2005 S.B. 279)