2023 New York Laws › UCC - Uniform Commercial Code › Article 4 - Bank Deposits and Collections › Part 2 - Collection of Items: Depositary and Collecting Banks › 4-207 - Warranties of Customer and Collecting Bank on Transfer or Presentment of Items; Time for Claims.

Section 4--207. Warranties  of  Customer and Collecting Bank on Transfer
or Presentment of Items; Time for Claims.
(1) Each customer or collecting bank who obtains payment or acceptance
of an item and each prior customer and collecting bank warrants  to  the
payor  bank  or  other  payor who in good faith pays or accepts the item
that
(a) he has a good title to the item or is  authorized  to  obtain
payment  or acceptance on behalf of one who has a good title;
and
(b) he has no knowledge that the signature of the maker or drawer
is unauthorized, except that this warranty is  not  given  by
any  customer  or  collecting  bank  that  is a holder in due
course and acts in good faith
(i) to a maker with respect to the maker's own signature; or
(ii) to a drawer with respect to the drawer's  own  signature,
whether or not the drawer is also the drawee; or
(iii) to  an  acceptor  of  an item if the holder in due course
took the  item  after  the  acceptance  or  obtained  the
acceptance  without knowledge that the drawer's signature
was unauthorized; and
(c) the item has not been materially altered,  except  that  this
warranty is not given by any customer or collecting bank that
is a holder in due course and acts in good faith
(i) to the maker of a note; or
(ii) to  the  drawer  of  a draft whether or not the drawer is
also the drawee; or
(iii) to the acceptor of an item with respect to an  alteration
made  prior to the acceptance if the holder in due course
took the item  after  the  acceptance,  even  though  the
acceptance  provided  "payable  as  originally  drawn" or
equivalent terms; or
(iv) to the acceptor of an item with respect to an  alteration
made after the acceptance.
(2) Each customer and  collecting  bank  who  transfers  an  item  and
receives  a  settlement  or  other  consideration for it warrants to his
transferee and to any subsequent collecting bank who takes the  item  in
good faith that
(a) he  has  a  good title to the item or is authorized to obtain
payment or acceptance on behalf of one who has a  good  title
and the transfer is otherwise rightful; and
(b) all  signatures  are  genuine or authorized; and (c) the item
has not been materially altered; and
(d) no defense of any party is good against him; and
(e) he has no knowledge of any insolvency  proceeding  instituted
with  respect  to  the  maker or acceptor or the drawer of an
unaccepted item.
In addition each customer and collecting bank so  transferring  an  item
and  receiving  a  settlement  or  other consideration engages that upon
dishonor and any necessary notice of dishonor and protest he  will  take
up the item.
(3)  The  warranties  and the engagement to honor set forth in the two
preceding subsections arise notwithstanding the absence  of  indorsement
or  words  of  guaranty or warranty in the transfer or presentment and a
collecting bank remains liable for their breach  despite  remittance  to
its  transferor.  Damages for breach of such warranties or engagement to
honor shall not exceed the consideration received  by  the  customer  or
collecting bank responsible plus finance charges and expenses related to
the item, if any
(4)  Unless  a claim for breach of warranty under this section is made
within a reasonable time after the person claiming learns of the breach,
the person liable is discharged to the extent of any loss caused by  the
delay in making claim.