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California Commercial Code Section 3417

Legal Research Home > California Laws > Commercial Code > California Commercial Code Section 3417

3417.  (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 all of the following to the drawee making
payment or accepting the draft in good faith:
   (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.
   (4) If the draft is a demand draft, creation of the demand draft
according to the terms on its face was authorized by the person
identified as drawer.
   (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
subdivision 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 subdivision.
   (c) If a drawee asserts a claim for breach of warranty under
subdivision (a) based on an unauthorized indorsement of the draft or
an alteration of the draft, the warrantor may defend by proving that
the indorsement is effective under Section 3404 or 3405 or the drawer
is precluded under Section 3406 or 4406 from asserting against the
drawee the unauthorized indorsement or alteration.
   (d) If (i) a dishonored draft is presented for payment to the
drawer or an indorser or (ii) any other instrument is presented for
payment to a party obliged to pay the instrument, and (iii) payment
is received, the following rules apply:
   (1) The person obtaining payment and a prior transferor of the
instrument warrant to the person making payment in good faith that
the warrantor is, or was, at the time the warrantor transferred the
instrument, a person entitled to enforce the instrument or authorized
to obtain payment on behalf of a person entitled to enforce the
instrument.
   (2) The person making payment may recover from any warrantor for
breach of warranty an amount equal to the amount paid plus expenses
and loss of interest resulting from the breach.
   (e) The warranties stated in subdivisions (a) and (d) 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) or
(d) is discharged to the extent of any loss caused by the delay in
giving notice of the claim.
   (f) A cause of action for breach of warranty under this section
accrues when the claimant has reason to know of the breach.
   (g) A demand draft is a check, as provided in subdivision (f) of
Section 3104.
   (h) If the warranty in paragraph (4) 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