§ 25-4-207. Transfer warranties. - North Carolina Statutes

§ 25‑4‑207. Transfer warranties.

(a)        A customer orcollecting bank that transfers an item and receives a settlement or otherconsideration warrants to the transferee and to any subsequent collecting bankthat:

(1)        The warrantor is aperson entitled to enforce the item;

(2)        All signatures onthe item are authentic and authorized;

(3)        The item has notbeen altered;

(4)        The item is notsubject to a defense or claim in recoupment (G.S. 25‑3‑305(a)) ofany party that can be asserted against the warrantor; and

(5)        The warrantor has noknowledge of any insolvency proceeding commenced with respect to the maker oracceptor or, in the case of an unaccepted draft, the drawer.

(b)        If an item isdishonored, a customer or collecting bank transferring the item and receivingsettlement or other consideration is obliged to pay the amount due on the item(i) according to the terms of the item at the time it was transferred, or (ii)if the transfer was of an incomplete item, according to its terms whencompleted as stated in G.S. 25‑3‑115 and G.S. 25‑3‑407.The obligation of a transferor is owed to the transferee and to any subsequentcollecting bank that takes the item in good faith. A transferor cannot disclaimits obligation under this subsection by an indorsement stating that it is made"without recourse" or otherwise disclaiming liability.

(c)        A person to whomthe warranties under subsection (a) of this section are made and who took theitem in good faith may recover from the warrantor as damages for breach ofwarranty an amount equal to the loss suffered as a result of the breach, butnot more than the amount of the item plus expenses and loss of interestincurred as a result of the breach.

(d)        The warrantiesstated in subsection (a) of this section cannot be disclaimed with respect tochecks. Unless notice of a claim for breach of warranty is given to thewarrantor within 30 days after the claimant has reason to know of the breachand the identity of the warrantor, the warrantor is discharged to the extent ofany loss caused by the delay in giving notice of the claim.

(e)        A cause of actionfor breach of warranty under this section accrues when the claimant has reasonto know of the breach. (1965, c. 700, s. 1; 1995, c. 232, s. 2.)