Section 4–207. (a) A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that:
(1) the warrantor is a person entitled to enforce the item;
(2) all signatures on the item are authentic and authorized;
(3) the item has not been altered;
(4) the item is not subject to a defense or claim in recoupment (section 3–305(a)) of any party that can be asserted against the warrantor; and
(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.
(b) If an item is dishonored, a customer or collecting bank transferring the item and receiving settlement or other consideration is obliged to pay the amount due on the item (i) according to the terms of the item at the time it was transferred, or (ii) if the transfer was of an incomplete item, according to its terms when completed as stated in sections 3–115 and 3–407. The obligation of a transferor is owed to the transferee and to any subsequent collecting bank that takes the item in good faith. A transferor cannot disclaim its obligation under this subsection by an indorsement stating that it is made ''without recourse'' or otherwise disclaiming liability.
(c) A person to whom the warranties under subsection (a) are made and who took the item 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 item plus expenses and loss of interest incurred as a result of the breach.
(d) The warranties stated in subsection (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 warrantor is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(e) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
Structure Massachusetts General Laws
Part I - Administration of the Government
Title XV - Regulation of Trade
Chapter 106 - Uniform Commercial Code
Article 4 - Bank Deposits and Collections
Section 4-213 - Medium and Time of Settlement by Bank
Section 4-214 - Right of Charge–back or Refund; Liability of Collecting Bank; Return of Item
Section 4-211 - When Bank Gives Value for Purposes of Holder in Due Course
Section 4-216 - Insolvency and Preference
Section 4-302 - Payor Bank's Responsibility for Late Return of Item
Section 4-407 - Payor Bank's Right to Subrogation on Improper Payment
Section 4-401 - When Bank May Charge Customer's Account
Section 4-404 - Bank Not Obliged to Pay Check More Than Six Months Old
Section 4-405 - Death or Incompetence of Customer
Section 4-406 - Customer's Duty to Discover and Report Unauthorized Signature or Alteration
Section 4-210 - Security Interest of Collecting Bank in Items, Accompanying Documents and Proceeds
Section 4-502 - Presentment of ''on Arrival'' Drafts
Section 4-209 - Encoding and Retention Warranties
Section 4-104 - Definitions and Index of Definitions
Section 4-207 - Transfer Warranties
Section 4-103 - Variation by Agreement; Measure of Damages; Action Constituting Ordinary Care
Section 4-106 - Payable Through or Payable at Bank; Collecting Bank
Section 4-107 - Separate Office of Bank
Section 4-108 - Time of Receipt of Items
Section 4-110 - Electronic Presentment
Section 4-111 - Statute of Limitations
Section 4-202 - Responsibility for Collection or Return; When Action Timely
Section 4-203 - Effect of Instructions
Section 4-204 - Methods of Sending and Presenting; Sending Direct to Payor Bank
Section 4-205 - Depositary Bank Holder of Unindorsed Item
Section 4-206 - Transfer Between Banks
Section 4-208 - Presentment Warranties
Section 4-504 - Privilege of Presenting Bank to Deal With Goods; Security Interest for Expenses
Section 4-403 - Customer's Right to Stop Payment; Burden of Proof of Loss