(a) A person who transfers an instrument for consideration warrants to the transferee and, if the transfer is by endorsement, to any subsequent transferee that:

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Terms Used In Tennessee Code 47-3-416

  • Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
  • Person: includes a corporation, firm, company or association. See Tennessee Code 1-3-105
(1) The warrantor is a person entitled to enforce the instrument;
(2) All signatures on the instrument are authentic and authorized;
(3) The instrument has not been altered;
(4) The instrument is not subject to a defense or claim in recoupment of any party which can be asserted against the warrantor;
(5) 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
(6) If the instrument is a payee-initiated demand draft, the creation of the instrument according to the terms on its face was authorized by the person on whose account the instrument is drawn.
(b) A person to whom the warranties under subsection (a) are made and who took the instrument 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 instrument plus expenses and loss of interest incurred as a result of the breach.
(c) The warranties stated in subsection (a) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within thirty (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) is discharged to the extent of any loss caused by the delay in giving notice of the claim.
(d) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.
(e) A warrantor does not make the warranty under subdivision (a)(6) to a transferee who would not under then-applicable law make the same or a substantially identical warranty to the warrantor with respect to a payee-initiated demand draft transferred by the transferee to the warrantor.
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