CO Code § 4-4-207 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 4 - Bank Deposits and Collections|Part 2 - Collection of Items - Depositary and Collecting Banks|§ 4-4-207. Transfer Warranties

  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:   The warrantor is a person entitled to enforce the item;    All signatures on the item are authentic and authorized;    The item has not been altered;    The item is not subject to a defense or claim in recoupment (section 4-3-305 (a)) of any party that can be asserted against the warrantor;    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; and    If the item is a demand draft, creation of the item according to the terms on its face was authorized by the person identified as drawer. Nothing in this section shall be construed to impair the rights of the drawer against the drawee.       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 4-3-115 and 4-3-407. 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 (b) by an indorsement stating that it is made “without recourse” or otherwise disclaiming liability.    A person to whom the warranties under subsection (a) of this section 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.    The warranties stated in subsection (a) of this section cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty 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.    A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.    If the warranty in paragraph (6) of subsection (a) of this section is not given by a transferor or collecting bank under applicable conflict of law rules, then the warranty is not given to that transferor when that transferor is a transferee, nor to any prior collecting bank of that transferee.     History. Source: L. 94: Entire article amended with relocations, p. 887, § 2, effective January 1, 1995. L. 2001: (a) amended and (f) added, p. 868, § 6, effective August 8.    Cross references:   For the legislative declaration contained in the 2001 act amending subsection (a) and enacting subsection (f), see section 1 of chapter 244, Session Laws of Colorado 2001.   OFFICIAL COMMENT   Except for subsection (b), this section conforms to Section 3-416 and extends its coverage to items. The substance of this section is discussed in the Comment to Section 3-416. Subsection (b) provides that customers or collecting banks that transfer items, whether by indorsement or not, undertake to pay the item if the item is dishonored. This obligation cannot be disclaimed by a “without recourse” indorsement or otherwise. With respect to checks, Regulation CC Section 229.34 states the warranties made by paying and returning banks.   ANNOTATION   Law reviews. For article, “Payee v. Depository Bank: What is the UCC Defense to Handling Checks Bearing Forged Indorsements?”, see 45 U. Colo. L. Rev. 281.   Annotator's note. The following annotations include cases decided under former provisions similar to this section.   Liability of indorser where estoppel created. While the principle that an indorser is liable on his warranty is correctly stated, the rule has no application when an estoppel has been created which would preclude plaintiff from obtaining a refund of the amount paid to defendant. First Nat'l Bank v. Ulibarri, 38 Colo. App. 428, 557 P.2d 1221 (1976).   Payee may not maintain action against depositary bank on the basis of either this section under former law or § 4-3-417 under former law. Nat'l Sur. Corp. v. Citizens State Bank, 41 Colo. App. 580, 593 P.2d 362 (1978), aff'd, 199 Colo. 497 , 612 P.2d 70 (1980).   A bank that accepts and pays a check with an unauthorized or forged endorsement warrants to subsequent transferees the validity of that endorsement and may be held liable on that warranty. The warranty's purpose is to place on a bank taking an instrument from a person making an unauthorized endorsement the responsibility of collecting from that person. The warranty exists even if a cashier's check is involved. Vectra Bank of Englewood v. Bank Western, 890 P.2d 259 (Colo. App. 1995) (decided under former law).   However, a transfer warranty as to the genuineness of the drawer's signature does not apply for the benefit of the drawee bank. Decibel Credit Union v. Pueblo Bank & Trust Co., 996 P.2d 784 (Colo. App. 2000).   Attorney fees are not “damages” and, therefore, are not within the contemplation of subsection (3) under former law. Vectra Bank of Englewood v. Bank Western, 890 P.2d 259 (Colo. App. 1995) (decided under former law).