What is transferor warranty of a negotiable instrument?

A transferor of a negotiable instrument warrants the following to the recipient of the instrument:

• Good Title - The transferor has good title to the instrument;
• Enforceability - The transferor is entitled to enforce the instrument;
• Authorization - All signatures are authorized and authentic;
• Alterations - There have been no alterations to the instrument;
• Defenses - There are no defenses to enforcing the instrument; and
• Solvency - The transferor does not know the payor to be insolvent.

Transfer warranties apply when the transferor transfers the instrument for consideration. The new holder only receives transfer warranties from an immediate transferor. Thus, a holder cannot enforce the instrument pursuant to transfer warranty against anyone who transferred the instrument without consideration or did not directly transfer the instrument to her.

Note: A payor bank of a draft does not receive transfer warranty, as the instrument is presented to the bank, rather than transferred. Presentment warranty is discussed separately.

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