New Jersey § 12a:3-417

§ 12a:3-417.

a. If an unaccepted draft is presented to the drawee for payment or acceptance and

the drawee pays or accepts the draft, the person obtaining payment or acceptance,

at the time of presentment, and a previous transferor of the draft, at the time of

transfer, warrant to the drawee making payment or accepting the draft in good faith

that: (1) the warrantor is, or was, at the time the warrantor transferred the draft, a person

entitled to enforce the draft or authorized to obtain payment or acceptance of the

draft on behalf of a person entitled to enforce the draft; (2) the draft has not been altered; and (3) the warrantor has no knowledge that the signature of the drawer of the draft is

unauthorized. b. A drawee making payment may recover from any warrantor damages for breach of warranty

equal to the amount paid by the drawee less the amount the drawee received or is entitled

to receive from the drawer because of the payment. In addition, the drawee is entitled to compensation for expenses and loss of interest

resulting from the breach. The right of the drawee to recover damages under this subsection is not affected

by any failure of the drawee to exercise ordinary care in making payment. If the drawee accepts the draft, breach of warranty is a defense to the obligation

of the acceptor. If the acceptor makes payment with respect to the draft, the acceptor is entitled

to recover from any warrantor for breach of warranty the amounts stated in this subsection. c. If a drawee asserts a claim for breach of warranty under subsection a. of this

section based on an unauthorized indorsement of the draft or an alteration of the

draft, the warrantor may defend by proving that the indorsement is effective under

12A:3-404 or 12A:3-405 or the drawer is precluded under 12A:3-406 or 12A:4-406 from

asserting against the drawee the unauthorized indorsement or alteration. d. If a dishonored draft is presented for payment to the drawer or an indorser or

any other instrument is presented for payment to a party obliged to pay the instrument,

and payment is received, the following rules apply: (1) The person obtaining payment and a prior transferor of the instrument warrant

to the person making payment in good faith that the warrantor is, or was, at the time

the warrantor transferred the instrument, a person entitled to enforce the instrument

or authorized to obtain payment on behalf of a person entitled to enforce the instrument. (2) The person making payment may recover from any warrantor for breach of warranty

an amount equal to the amount paid plus expenses and loss of interest resulting from

the breach. e. The warranties stated in subsections a. and d. of this section 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 liability of the warrantor under subsection b. or d. of this section

is discharged to the extent of any loss caused by the delay in giving notice of the

claim. f. A cause of action for breach of warranty under this section accrues when the claimant

has reason to know of the breach.