SF 2332

Introduction - 83rd Legislature (2003 - 2004)

Posted on 12/15/2009 12:00 a.m.

  1.1                          A bill for an act 
  1.2             relating to commerce; the Uniform Commercial Code; 
  1.3             regulating breaches of warranties made with respect to 
  1.4             remotely created items; amending Minnesota Statutes 
  1.5             2003 Supplement, sections 336.3-416; 336.3-417; 
  1.6             336.4-207; 336.4-208. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 2003 Supplement, section 
  1.9   336.3-416, is amended to read: 
  1.10     336.3-416 [TRANSFER WARRANTIES.] 
  1.11     (a) A person who transfers an instrument for consideration 
  1.12  warrants to the transferee and, if the transfer is by 
  1.13  endorsement, to any subsequent transferee that:  
  1.14     (1) the warrantor is a person entitled to enforce the 
  1.15  instrument; 
  1.16     (2) all signatures on the instrument are authentic and 
  1.17  authorized; 
  1.18     (3) the instrument has not been altered; 
  1.19     (4) the instrument is not subject to a defense or claim in 
  1.20  recoupment of any party which can be asserted against the 
  1.21  warrantor; 
  1.22     (5) the warrantor has no knowledge of any insolvency 
  1.23  proceeding commenced with respect to the maker or acceptor or, 
  1.24  in the case of an unaccepted draft, the drawer; and 
  1.25     (6) with respect to a remotely-created item, the person on 
  1.26  whose account the item is drawn authorized the issuance of the 
  2.1   item in the amount for which the item is drawn.  
  2.2      (b) A person to whom the warranties under subsection (a) 
  2.3   are made and who took the instrument in good faith may recover 
  2.4   from the warrantor as damages for breach of warranty an amount 
  2.5   equal to the loss suffered as a result of the breach, but not 
  2.6   more than the amount of the instrument plus expenses and loss of 
  2.7   interest incurred as a result of the breach. 
  2.8      (c) The warranties stated in subsection (a) cannot be 
  2.9   disclaimed with respect to checks.  Unless notice of a claim for 
  2.10  breach of warranty is given to the warrantor within 30 days 
  2.11  after the claimant has reason to know of the breach and the 
  2.12  identity of the warrantor, the liability of the warrantor under 
  2.13  subsection (b) is discharged to the extent of any loss caused by 
  2.14  the delay in giving notice of the claim.  
  2.15     (d) A cause of action for breach of warranty under this 
  2.16  section accrues when the claimant has reason to know of the 
  2.17  breach.  
  2.18     (e) No A claim for breach of the warranty in subsection 
  2.19  (a)(6) is available against a person to which an item was 
  2.20  transferred previous transferor of the item only to the extent 
  2.21  that under applicable law (including the applicable 
  2.22  choice-of-law principles) the person that transferred all 
  2.23  previous transferors of the item to that person did not 
  2.24  make made the warranty in subsection (a)(6). 
  2.25     Sec. 2.  Minnesota Statutes 2003 Supplement, section 
  2.26  336.3-417, is amended to read: 
  2.27     336.3-417 [PRESENTMENT WARRANTIES.] 
  2.28     (a) If an unaccepted draft is presented to the drawee for 
  2.29  payment or acceptance and the drawee pays or accepts the draft, 
  2.30  (i) the person obtaining payment or acceptance, at the time of 
  2.31  presentment, and (ii) a previous transferor of the draft, at the 
  2.32  time of transfer, warrant to the drawee making payment or 
  2.33  accepting the draft in good faith that:  
  2.34     (1) the warrantor is, or was, at the time the warrantor 
  2.35  transferred the draft, a person entitled to enforce the draft or 
  2.36  authorized to obtain payment or acceptance of the draft on 
  3.1   behalf of a person entitled to enforce the draft; 
  3.2      (2) the draft has not been altered; 
  3.3      (3) the warrantor has no knowledge that the signature of 
  3.4   the drawer of the draft is unauthorized; and 
  3.5      (4) with respect to any remotely-created item, the person 
  3.6   on whose account the item is drawn authorized the issuance of 
  3.7   the item in the amount for which the item is drawn.  
  3.8      (b) A drawee making payment may recover from any warrantor 
  3.9   damages for breach of warranty equal to the amount paid by the 
  3.10  drawee less the amount the drawee received or is entitled to 
  3.11  receive from the drawer because of the payment.  In addition, 
  3.12  the drawee is entitled to compensation for expenses and loss of 
  3.13  interest resulting from the breach.  The right of the drawee to 
  3.14  recover damages under this subsection is not affected by any 
  3.15  failure of the drawee to exercise ordinary care in making 
  3.16  payment.  If the drawee accepts the draft, breach of warranty is 
  3.17  a defense to the obligation of the acceptor.  If the acceptor 
  3.18  makes payment with respect to the draft, the acceptor is 
  3.19  entitled to recover from any warrantor for breach of warranty 
  3.20  the amounts stated in this subsection.  
  3.21     (c) If a drawee asserts a claim for breach of warranty 
  3.22  under subsection (a) based on an unauthorized endorsement of the 
  3.23  draft or an alteration of the draft, the warrantor may defend by 
  3.24  proving that the endorsement is effective under section 
  3.25  336.3-404 or 336.3-405 or the drawer is precluded under section 
  3.26  336.3-406 or 336.4-406 from asserting against the drawee the 
  3.27  unauthorized endorsement or alteration.  
  3.28     (d) If (i) a dishonored draft is presented for payment to 
  3.29  the drawer or an endorser or (ii) any other instrument is 
  3.30  presented for payment to a party obliged to pay the instrument, 
  3.31  and (iii) payment is received, the following rules apply:  
  3.32     (1) The person obtaining payment and a prior transferor of 
  3.33  the instrument warrant to the person making payment in good 
  3.34  faith that the warrantor is, or was, at the time the warrantor 
  3.35  transferred the instrument, a person entitled to enforce the 
  3.36  instrument or authorized to obtain payment on behalf of a person 
  4.1   entitled to enforce the instrument.  
  4.2      (2) The person making payment may recover from any 
  4.3   warrantor for breach of warranty an amount equal to the amount 
  4.4   paid plus expenses and loss of interest resulting from the 
  4.5   breach.  
  4.6      (e) The warranties stated in subsections (a) and (d) cannot 
  4.7   be disclaimed with respect to checks.  Unless notice of a claim 
  4.8   for breach of warranty is given to the warrantor within 30 days 
  4.9   after the claimant has reason to know of the breach and the 
  4.10  identity of the warrantor, the liability of the warrantor under 
  4.11  subsection (b) or (d) is discharged to the extent of any loss 
  4.12  caused by the delay in giving notice of the claim.  
  4.13     (f) A cause of action for breach of warranty under this 
  4.14  section accrues when the claimant has reason to know of the 
  4.15  breach. 
  4.16     (g) No A claim for breach of the warranty in subsection 
  4.17  (a)(4) is available against a person to which an item was 
  4.18  transferred previous transferor of the item only to the extent 
  4.19  that under applicable law (including the applicable 
  4.20  choice-of-law principles) the person that transferred all 
  4.21  previous transferors of the item to that person did not make 
  4.22  made the warranty in subsection (a)(4). 
  4.23     Sec. 3.  Minnesota Statutes 2003 Supplement, section 
  4.24  336.4-207, is amended to read: 
  4.25     336.4-207 [TRANSFER WARRANTIES.] 
  4.26     (a) A customer or collecting bank that transfers an item 
  4.27  and receives a settlement or other consideration warrants to the 
  4.28  transferee and to any subsequent collecting bank that:  
  4.29     (1) the warrantor is a person entitled to enforce the item; 
  4.30     (2) all signatures on the item are authentic and 
  4.31  authorized; 
  4.32     (3) the item has not been altered; 
  4.33     (4) the item is not subject to a defense or claim in 
  4.34  recoupment (section 336.3-305(a)) of any party that can be 
  4.35  asserted against the warrantor; 
  4.36     (5) the warrantor has no knowledge of any insolvency 
  5.1   proceeding commenced with respect to the maker or acceptor or, 
  5.2   in the case of an unaccepted draft, the drawer; and 
  5.3      (6) with respect to any remotely-created item, the person 
  5.4   on whose account the item is drawn authorized the issuance of 
  5.5   the item in the amount for which the item is drawn.  
  5.6      (b) If an item is dishonored, a customer or collecting bank 
  5.7   transferring the item and receiving settlement or other 
  5.8   consideration is obliged to pay the amount due on the item (i) 
  5.9   according to the terms of the item at the time it was 
  5.10  transferred, or (ii) if the transfer was of an incomplete item, 
  5.11  according to its terms when completed as stated in sections 
  5.12  336.3-115 and 336.3-407.  The obligation of a transferor is owed 
  5.13  to the transferee and to any subsequent collecting bank that 
  5.14  takes the item in good faith.  A transferor cannot disclaim its 
  5.15  obligation under this subsection by an endorsement stating that 
  5.16  it is made "without recourse" or otherwise disclaiming liability.
  5.17     (c) A person to whom the warranties under subsection (a) 
  5.18  are made and who took the item in good faith may recover from 
  5.19  the warrantor as damages for breach of warranty an amount equal 
  5.20  to the loss suffered as a result of the breach, but not more 
  5.21  than the amount of the item plus expenses and loss of interest 
  5.22  incurred as a result of the breach.  
  5.23     (d) The warranties stated in subsection (a) cannot be 
  5.24  disclaimed with respect to checks.  Unless notice of a claim for 
  5.25  breach of warranty is given to the warrantor within 30 days 
  5.26  after the claimant has reason to know of the breach and the 
  5.27  identity of the warrantor, the warrantor is discharged to the 
  5.28  extent of any loss caused by the delay in giving notice of the 
  5.29  claim. 
  5.30     (e) A cause of action for breach of warranty under this 
  5.31  section accrues when the claimant has reason to know of the 
  5.32  breach. 
  5.33     (f) No A claim for breach in the warranty in subsection 
  5.34  (a)(6) is available against a person to which an item was 
  5.35  transferred previous transferor of the item only to the extent 
  5.36  that under applicable law (including the applicable 
  6.1   choice-of-law principles) the person that transferred all 
  6.2   previous transferors of the item to that person did not 
  6.3   make made the warranty in subsection (a)(6). 
  6.4      Sec. 4.  Minnesota Statutes 2003 Supplement, section 
  6.5   336.4-208, is amended to read: 
  6.6      336.4-208 [PRESENTMENT WARRANTIES.] 
  6.7      (a) If an unaccepted draft is presented to the drawee for 
  6.8   payment or acceptance and the drawee pays or accepts the draft, 
  6.9   (i) the person obtaining payment or acceptance, at the time of 
  6.10  presentment, and (ii) a previous transferor of the draft, at the 
  6.11  time of transfer, warrant to the drawee that pays or accepts the 
  6.12  draft in good faith that:  
  6.13     (1) the warrantor is, or was, at the time the warrantor 
  6.14  transferred the draft, a person entitled to enforce the draft or 
  6.15  authorized to obtain payment or acceptance of the draft on 
  6.16  behalf of a person entitled to enforce the draft; 
  6.17     (2) the draft has not been altered; 
  6.18     (3) the warrantor has no knowledge that the signature of 
  6.19  the purported drawer of the draft is unauthorized; and 
  6.20     (4) with respect to any remotely-created item, the person 
  6.21  on whose account the item is drawn authorized the issuance of 
  6.22  the item in the amount for which the item is drawn.  
  6.23     (b) A drawee making payment may recover from a warrantor 
  6.24  damages for breach of warranty equal to the amount paid by the 
  6.25  drawee less the amount the drawee received or is entitled to 
  6.26  receive from the drawer because of the payment.  In addition, 
  6.27  the drawee is entitled to compensation for expenses and loss of 
  6.28  interest resulting from the breach.  The right of the drawee to 
  6.29  recover damages under this subsection is not affected by any 
  6.30  failure of the drawee to exercise ordinary care in making 
  6.31  payment.  If the drawee accepts the draft (i) breach of warranty 
  6.32  is a defense to the obligation of the acceptor, and (ii) if the 
  6.33  acceptor makes payment with respect to the draft, the acceptor 
  6.34  is entitled to recover from a warrantor for breach of warranty 
  6.35  the amounts stated in this subsection.  
  6.36     (c) If a drawee asserts a claim for breach of warranty 
  7.1   under subsection (a) based on an unauthorized endorsement of the 
  7.2   draft or an alteration of the draft, the warrantor may defend by 
  7.3   proving that the endorsement is effective under section 
  7.4   336.3-404 or 336.3-405 or the drawer is precluded under section 
  7.5   336.3-406 or 336.4-406 from asserting against the drawee the 
  7.6   unauthorized endorsement or alteration.  
  7.7      (d) If (i) a dishonored draft is presented for payment to 
  7.8   the drawer or an endorser or (ii) any other item is presented 
  7.9   for payment to a party obliged to pay the item, and the item is 
  7.10  paid, the person obtaining payment and a prior transferor of the 
  7.11  item warrant to the person making payment in good faith that the 
  7.12  warrantor is, or was, at the time the warrantor transferred the 
  7.13  item, a person entitled to enforce the item or authorized to 
  7.14  obtain payment on behalf of a person entitled to enforce the 
  7.15  item.  The person making payment may recover from any warrantor 
  7.16  for breach of warranty an amount equal to the amount paid plus 
  7.17  expenses and loss of interest resulting from the breach.  
  7.18     (e) The warranties stated in subsections (a) and (d) cannot 
  7.19  be disclaimed with respect to checks.  Unless notice of a claim 
  7.20  for breach of warranty is given to the warrantor within 30 days 
  7.21  after the claimant has reason to know of the breach and the 
  7.22  identity of the warrantor, the warrantor is discharged to the 
  7.23  extent of any loss caused by the delay in giving notice of the 
  7.24  claim.  
  7.25     (f) A cause of action for breach of warranty under this 
  7.26  section accrues when the claimant has reason to know of the 
  7.27  breach. 
  7.28     (g) No A claim for breach of the warranty in subsection 
  7.29  (a)(4) is available against a person to which an item was 
  7.30  transferred previous transferor of the item only to the extent 
  7.31  that under applicable law (including the applicable 
  7.32  choice-of-law principle) the person that transferred all 
  7.33  previous transferors of the item to that person did not 
  7.34  make made the warranty in subsection (a)(4).