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Warranty Liability

Learn about the various types of warranty liability incurred by parties to negotiable instruments.


In other lessons, we discussed the liability that one incurs by virtue of becoming a party to a negotiable instrument. Now, we’ll discuss another way a party may incur liability on a negotiable instrument: the breach of an implied warranty.

I. Article 3 Warranties

A negotiable instrument goes through three periods in its life: issuance, transfer, and presentment. Under Article 3, upon transfer or presentment, the instrument’s transferor or presenter makes certain implied warranties to the...