Tex. Bus. & Com. Code Section 4.207
Transfer Warranties

(a)

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 that:

(1)

the warrantor is a person entitled to enforce the item;

(2)

all signatures on the item are authentic and authorized;

(3)

the item has not been altered;

(4)

the item is not subject to a defense or claim in recoupment (Section 3.305 (Defenses and Claims in Recoupment)(a)) of any party that 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)

with respect to a remotely-created 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.

(b)

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 Sections 3.115 (Incomplete Instrument) and 3.407 (Alteration). 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 indorsement stating that it is made “without recourse” or otherwise disclaiming liability.

(c)

A person to whom the warranties under Subsection (a) 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.

(d)

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 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.

(e)

A cause of action for breach of warranty under this section accrues when the claimant has reason to know of the breach.

(f)

If the warranty under Subsection (a)(6) is not given by a transferor or collecting bank under applicable conflict of law rules, the warranty is not given to that transferor when that transferor is a transferee or to any prior collecting bank of that transferee.
Acts 1967, 60th Leg., p. 2343, ch. 785, Sec. 1, eff. Sept. 1, 1967. Amended by Acts 1995, 74th Leg., ch. 921, Sec. 4, eff. Jan. 1, 1996; Acts 1997, 75th Leg., ch. 131, Sec. 5, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 95 (S.B. 1563), Sec. 16, eff. September 1, 2005.

Source: Section 4.207 — Transfer Warranties, https://statutes.­capitol.­texas.­gov/Docs/BC/htm/BC.­4.­htm#4.­207 (accessed Apr. 20, 2024).

4.101
Short Title 4.102
Applicability 4.103
Variation by Agreement 4.104
Definitions and Index of Definitions 4.106
Payable Through or Payable at Bank 4.107
Separate Office of a Bank 4.108
Time of Receipt of Items 4.109
Delays 4.110
Electronic Presentment 4.111
Statute of Limitations 4.112
Payment of Check at Par 4.202
Responsibility for Collection or Return 4.203
Effect of Instructions 4.204
Methods of Sending and Presenting 4.205
Depository Bank Holder of Unindorsed Item 4.206
Transfer Between Banks 4.207
Transfer Warranties 4.208
Presentment Warranties 4.209
Encoding and Retention Warranties 4.210
Security Interest of Collecting Bank in Items, Accompanying Documents and Proceeds 4.211
When Bank Gives Value for Purposes of Holder in Due Course 4.212
Presentment by Notice of Item Not Payable By, Through or at a Bank 4.213
Medium and Time of Settlement by Bank 4.214
Right of Charge-back or Refund 4.215
Final Payment of Item by Payor Bank 4.216
Insolvency and Preference 4.301
Deferred Posting 4.302
Payor Bank’s Responsibility for Late Return of Item 4.303
When Items Subject to Notice, Stop-payment Order, Legal Process, or Setoff 4.401
When Bank May Charge Customer’s Account 4.402
Bank’s Liability to Customer for Wrongful Dishonor 4.403
Customer’s Right to Stop Payment 4.404
Bank Not Obligated to Pay Check More than Six Months Old 4.405
Death or Incompetence of Customer 4.406
Customer’s Duty to Discover and Report Unauthorized Signature or Alteration 4.407
Payor Bank’s Right to Subrogation on Improper Payment 4.501
Handling of Documentary Drafts 4.503
Responsibility of Presenting Bank for Documents and Goods 4.504
Privilege of Presenting Bank to Deal with Goods
Green check means up to date. Up to date

Accessed:
Apr. 20, 2024

§ 4.207’s source at texas​.gov