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Texas Business & Commerce Code - Section 4.208. Presentment Warranties

Legal Research Home > Texas Lawyer > Business & Commerce Code > Texas Business & Commerce Code - Section 4.208. Presentment Warranties

§ 4.208. PRESENTMENT WARRANTIES.  (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 that pays or accepts 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 purported drawer of the draft is unauthorized;  and
		(4)  with respect to any 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 a 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 a warrantor for 
breach of warranty the amounts stated in this subsection.
	(c)  If a drawee asserts a claim for breach of warranty under 
Subsection (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 3.404 or 3.405 or the 
drawer is precluded under Section 3.406 or 4.406 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 item is presented for 
payment to a party obliged to pay the item, and the item is paid, the 
person obtaining payment and a prior transferor of the item warrant 
to the person making payment in good faith that the warrantor is, or 
was, at the time the warrantor transferred the item, a person 
entitled to enforce the item or authorized to obtain payment on 
behalf of a person entitled to enforce the item.  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 Subsections (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 warrantor 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)  If as to a particular item (1) a transferee (including a 
collecting bank) asserts a claim for breach of the warranty under 
Subsection (a)(4), but (2) under applicable law (including the 
applicable choice-of-law principles) that transferee would not 
make a warranty substantially similar to the warranty in Subsection 
(a)(4) if such transferee were a transferor, then that transferee 
would not receive the warranty in Subsection (a)(4) from any 
transferor.

Amended by Acts 1995, 74th Leg., ch. 921, § 4, eff. Jan. 1, 1996;  
Acts 1997, 75th Leg., ch. 131, § 6, eff. Sept. 1, 1997;  Acts 
2005, 79th Leg., ch. 95, § 17, eff. Sept. 1, 2005.

Last modified: August 10, 2007