Texas Business & Commerce Code

§ 3.417 — PRESENTMENT WARRANTIES

BC § 3.417Title 1. UNIFORM COMMERCIAL CODE · Ch. 3. NEGOTIABLE INSTRUMENTS · Art. D. LIABILITY OF PARTIES

Statute text

(a)If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, (i) the person obtaining payment or acceptance, at the time of presentment, and (ii) 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:

(1)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;

(2)the draft has not been altered;

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

(4)with respect to a remotely-created item, that the person on whose account the item is drawn authorized the issuance of the item in the amount for which the item is drawn.

(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.

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Legislative history

Acts 2005, 79th Leg., Ch. 95 (S.B. 1563), Sec. 9, eff. September 1, 2005.