810 ILCS 5/3-417
2021 Illinois Compiled Statutes|Chapter 810 - COMMERCIAL CODE|810 ILCS 5/ - Uniform Commercial Code.|Article 3 - Negotiable Instruments

 (from Ch. 26, par. 3-417)Sec. 3-417.     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 making payment or accepting 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; and(3) the warrantor has no knowledge that the signature     of the purported drawer of the draft is unauthorized.(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 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 any 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 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 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  liability of the warrantor under subsection (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.    (Source: P.A. 87-582; 87-1135.)