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California Commercial Code Section 3416

Legal Research Home > California Laws > Commercial Code > California Commercial Code Section 3416

3416.  (a) A person who transfers an instrument for consideration
warrants all of the following to the transferee and, if the transfer
is by indorsement, to any subsequent transferee:
   (1) The warrantor is a person entitled to enforce the instrument.
   (2) All signatures on the instrument are authentic and authorized.
   (3) The instrument has not been altered.
   (4) The instrument is not subject to a defense or claim in
recoupment of any party which can be asserted against the warrantor.
   (5) The warrantor has no knowledge of any insolvency proceeding
commenced with respect to the maker or acceptor or, in the case of an
unaccepted draft, the drawer.
   (6) If the instrument is a demand draft, creation of the
instrument according to the terms on its face was authorized by the
person identified as drawer.
   (b) A person to whom the warranties under subdivision (a) are made
and who took the instrument in good faith may recover from the
warrantor as damages for breach of warranty an amount equal to the
loss suffered as a result of the breach, but not more than the amount
of the instrument plus expenses and loss of interest incurred as a
result of the breach.
   (c) The warranties stated in subdivision (a) cannot be disclaimed
with respect to checks. Unless notice of a claim for breach of
warranty is given to the warrantor within 30 days after the claimant
has reason to know of the breach and the identity of the warrantor,
the liability of the warrantor under subdivision (b) is discharged to
the extent of any loss caused by the delay in giving notice of the
claim.
   (d) A cause of action for breach of warranty under this section
accrues when the claimant has reason to know of the breach.
   (e) If the warranty in paragraph (6) of subdivision (a) is not
given by a transferor under applicable conflict of law rules, then
the warranty is not given to that transferor when that transferor is
a transferee.

Last modified: February 22, 2013