Michigan Laws 440.4207 – Warranties of customer and collecting bank on transfer of items; accrual of cause of action
Current as of: 2024 | Check for updates
|
Other versions
Terms Used In Michigan Laws 440.4207
- Account: means any depositor credit account with a bank, including a demand, time, savings, passbook, share draft, or like account, other than an account evidenced by a certificate of deposit. See Michigan Laws 440.4104
- Bank: means a person engaged in the business of banking, including a saving bank, saving and loan association, credit union, or trust company. See Michigan Laws 440.4105
- Collecting bank: means a bank handling the item for collection except the payor bank. See Michigan Laws 440.4105
- Consumer: means an individual who enters into a transaction primarily for personal, family, or household purposes. See Michigan Laws 440.1201
- Customer: means any person having an account with a bank or for whom a bank has agreed to collect items, including a bank that maintains an account at another bank. See Michigan Laws 440.4104
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Draft: means a draft as defined in section 3104 or an item, other than an instrument, that is an order. See Michigan Laws 440.4104
- Good faith: except as otherwise provided in article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing. See Michigan Laws 440.1201
- Item: means an instrument or a promise or order to pay money handled by a bank for collection or pay. See Michigan Laws 440.4104
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Person: means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity. See Michigan Laws 440.1201
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
(1) 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 all of the following:
(a) That the warrantor is a person entitled to enforce the item.
(b) That all signatures on the item are authentic and authorized.
(c) That the item has not been altered.
(d) That the item is not subject to a defense or claim in recoupment under section 3305(1) of any party that can be asserted against the warrantor.
(e) That 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.
(f) With respect to any remotely created consumer item, that the person on whose account the item is drawn authorized the issuance of the item in the amount for which the item is drawn.
(2) 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 section 3115 and 3407. 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 by an endorsement stating that it is made “without recourse” or otherwise disclaiming liability.
(3) A person to whom the warranties under subsection (1) 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.
(4) The warranties stated in subsection (1) cannot be disclaimed with respect to checks. Unless notice of a claim for breach of warranty is given to the warrantor within 30 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.
(5) A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.