A . What warranties are given by an indorser? b. What warranties are given by a transferor by delivery without indorsement? c. If a person has no contractual liability on the instrument, does that mean he has no liability as a result of the transaction involved? Explain
a . (1) The transferor is entitled to enforce the instrument. (2) All signatures are genuine and authorized. (3) The instrument has not been altered. (4) No defense of any party is good against the transferor. (5) The transferor has no knowledge of any insolvency proceedings against the maker, the acceptor, or the drawer of an unaccepted instrument. (Indorsement extends these warranties to all subsequent transferees.)
b. Transfer without indorsement extends the above warranties only to the immediate transferee.
c. The law imposes contractual liability only on those who sign or have a representative agent sign a negotiable instrument. However, if you transfer bearer paper without indorsing it, you still have warranty liability to the immediate transferee. Warranty liability also applies to persons who obtain payment or acceptance of an instrument.
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