Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Tutoring
  • Home
  • Law, Transactions, & Risk Management
  • Commercial Law: Contract, Payments, Security Interests, & Bankruptcy

Warranty Liability Negotiable Instrument - Time Limitations

What are the time limits on asseting warranty liability?

Written by Jason Gordon

Updated at September 26th, 2021

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

Is there a time limitation for exercising warranties on negotiable instruments?Discussion QuestionPractice QuestionAcademic Research

Is there a time limitation for exercising warranties on negotiable instruments?

The holder of an instrument must make a warranty claim to a warrantor within 30 days of notice of dishonor of the instrument. Failure to give this notice within 30 days may relieve the warrantor from liability for any losses incurred as a result of the failure of the claimant to give timely notice.

Example: Emily is the holder of a draft drawn on ABC Financial. She received the draft from Clayton. Emily transfers the draft to Doug. The draft is subsequently transferred multiple times. Eventually, Easton presents the draft for payment. ABC pays the draft and then learns that Easton was not validly entitled to payment. ABC seeks to recoup the money paid from Easton, the presenter of the draft. When Easton and other transferors cannot be found, ABC attempts to enforce the instrument against Emily. ABC waits longer than 30 days to give Emily notice of its claim. This delay caused Emily to not be able to recover from Clayton, who she recently paid money she owed. She would have been able to offset the amount owed if she had been given timely notice. Her obligation to pay ABC on presentment warranty may be discharged due to her loss caused by ABCs delay in providing notice of its presentment claim.

Next Article: Discharge of Warranties of Negotiable Instrument Back to: COMMERCIAL PAPER

Related Topics

  • Guaranty or Guarantee
  • What is the role of a Guarantor or Surety of a negotiable instrument?
  • What is an Accord & Satisfaction?
  • What is primary and secondary liability on an instrument?
  • What is Drawer or Maker Liability for a negotiable instrument?
  • What is Transferor Warranty of a negotiable instrument?
  • What is Indorser Warranty of a negotiable instrument?
  • What is Presentment Warranty of a negotiable instrument?
  • What is a warrantors liability for a dishonored note or draft?
  • What is the time limitation for warranty of a negotiable instrument?
  • When are the warranties of a negotiable instrument discharged?

Discussion Question

Why do you think the UCC allows for a discharge of liability on a presentment claim for losses incurred because of late notification from a claimant seeking to enforce the instrument based upon warranty? What objectives are being served? Do you agree with this principle? Why or why not?

Practice Question

Tim presents a draft created by Stacy and drawn upon First Credit Union. Tim acquired the draft from Elvis. First Credit Union pays Tim and then learns that Tim was not entitled to payment. First Credit Union is able to recover from Tim on the basis of presentment warranty. Tim seeks to recover from Elvis based upon transferor and presentment warranties. Tim fails to give Elvis notice of his claim within 30 days of learning of the First Credit Unions dishonor. What does this mean for Tim and Elvis rights?

Academic Research


warranty liability negotiable instrument time limitations

Was this article helpful?

Yes
No

Related Articles

  • Contract Theory - Explained
  • Special Priority Rules for Proceeds from Sale of Collateral - Explained
  • Perfection of a Security Interest - Explained
  • Certified Check - Explained



©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand