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7 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Implied warranties: they arise automatically.
Warranty liability is off teh instrument since warranties are created by transfer or presentment, not indorsement of instrument. |
To use a warranty, possession of instrument is not needed as it is for contract liability.
Warranty liability survives final payment of an instrument. |
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Transfer Warranties
1. Who makes transfer warranties? (defendant)- transferor who receives consideration TW do not arise in a gift context; person transferring must receive consid. before transfer warranties are implied |
2. To whom are transfer warranties made? (plaintiff)
a) immediate transferee, and b) subsequent transferees if transforer indorsed [in banking context, liability runs to any subsequent collecting ank even w/o indorsement] c) drawee and maker never sue for breach of transfer warranty [drawees and makers can never sue for breach of transfer warranty- they get instruments presented to them, not transferred] |
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Transfer Warranties
a) Warrantor is entitled to enforce the instrument* Basically, this is a warranty of holder status b) All signatures authentic and authorized |
c) No alteration
d) No good defenses against transferor [instrument is not subject to any defenses which could be successfully asserted against the transferor. Thus, transferor warrants that if transferor were a P on the instrument, no defense that anyone has could defeat transferor]--> perfect plaintiff warranty |
e) No knowledge of insolvency proceedings. Warrantor has no knowledge of insolvency proceedings against maker, acceptor or drawer of an unaccepted draft. This is the only warranty where warrantor's lack of knowledge is relevant.
f) If remotely-created item, person identifed as drawer authorized the item. |
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[transfer warranties]
Disclaiming Warranties |
Checks: cannot disclaim
Non-checks: you may disclaim ('without warranties') |
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Presentment Warranties
1. Made on Presentment warning: don't confuse w/transfer warranties. they are mutually exclusive. P can only have one of these warranty CoA altho person may make both warranties. |
2) Who makes? (defendant)
a) presenter, and b) previous transferors |
3) Made to parties who pay in good faith, that is, makers, drawees, acceptors (plaintiff)
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4) Warranties when unaccepted draft presented to drawee
example: check- you make these when you cash your paycheck a) Warrantor entitled to enforce the draft or obtain payment b) no alteration c) no knowledge of unauthorized drawer's signature d) if remotely-created item, that person identified as the drawer actually authorized the item |
5) Warranty when other instruments presented
ex: dishonored draft to indorser; note to maker Warrantor entitled to enforce draft or obtain payment |
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Warranty v. Indorser's Contract
How do you know whether the P should bring suit against the indorser for breach of warranty or for breach of the indorser's contract? Determine identity of the P. |
If Plaintiff is holder: if the payor has not paid the instrument (e.g., check bounces or a promissory note is not paid by maker), then holder will sue the indorser on the indorser's contract.
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If Plaintiff is Payor: If payor has paid an dlater disocvers the payor should not have paid (i.e., check was forged or note was altered), the npayor will attempt to sue the indorser for breach of warranty (transfer or presentment, as appropriate under the facts) to recoup $
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