§ 25-3-417. Presentment warranties. - North Carolina Statutes

§25‑3‑417.  Presentment warranties.

(a)        If an unaccepteddraft is presented to the drawee for payment or acceptance and the drawee paysor accepts the draft, (i) the person obtaining payment or acceptance, at thetime of presentment, and (ii) a previous transferor of the draft, at the timeof transfer, warrant to the drawee making payment or accepting the draft ingood faith that:

(1)        The warrantor is, orwas, at the time the warrantor transferred the draft, a person entitled toenforce the draft or authorized to obtain payment or acceptance of the draft onbehalf of a person entitled to enforce the draft;

(2)        The draft has notbeen altered; and

(3)        The warrantor has noknowledge that the signature of the drawer of the draft is unauthorized.

(b)        A drawee makingpayment may recover from any warrantor damages for breach of warranty equal tothe amount paid by the drawee less the amount the drawee received or isentitled to receive from the drawer because of the payment. In addition, thedrawee is entitled to compensation for expenses and loss of interest resultingfrom the breach. The right of the drawee to recover damages under thissubsection is not affected by any failure of the drawee to exercise ordinarycare in making payment. If the drawee accepts the draft, breach of warranty isa defense to the obligation of the acceptor. If the acceptor makes payment withrespect to the draft, the acceptor is entitled to recover from any warrantorfor breach of warranty the amounts stated in this subsection.

(c)        If a drawee assertsa claim for breach of warranty under subsection (a) of this section based on anunauthorized indorsement of the draft or an alteration of the draft, thewarrantor may defend by proving that the indorsement is effective under G.S. 25‑3‑404or G.S. 25‑3‑405 or the drawer is precluded under G.S. 25‑3‑406or G.S. 25‑4‑406 from asserting against the drawee the unauthorizedindorsement or alteration.

(d)        If (i) a dishonoreddraft is presented for payment to the drawer or an indorser, or (ii) any otherinstrument is presented for payment to a party obliged to pay the instrument,and (iii) payment is received, the following rules apply:

(1)        The person obtainingpayment and a prior transferor of the instrument warrant to the person makingpayment in good faith that the warrantor is, or was, at the time the warrantortransferred the instrument, a person entitled to enforce the instrument orauthorized to obtain payment on behalf of a person entitled to enforce theinstrument.

(2)        The person makingpayment may recover from any warrantor for breach of warranty an amount equalto the amount paid plus expenses and loss of interest resulting from thebreach.

(e)        The warrantiesstated in subsections (a) and (d) of this section cannot be disclaimed withrespect to checks. Unless notice of a claim for breach of warranty is given tothe warrantor within 30 days after the claimant has reason to know of thebreach and the identity of the warrantor, the liability of the warrantor undersubsection (b) or (d) of this section is discharged to the extent of any losscaused by the delay in giving notice of the claim.

(f)         A cause of actionfor breach of warranty under this section accrues when the claimant has reasonto know of the breach. (1899, c. 733, ss. 65, 69; Rev., ss. 2214, 2218; C.S.,ss. 3046, 3050; 1965, c. 700, s. 1; 1995, c. 232, s. 1.)