Asked by Keondra Rouse on May 28, 2024
Verified
Which of the following is true of warranty liability as it affects negotiable instruments?
A) Warranty liability applies to any persons who transfer an instrument and receive consideration.
B) A drawee of an unaccepted draft who pays in good faith receives a presentment warranty from the person obtaining payment and from all prior transferors of the draft.
C) A drawee who accepts an instrument in good faith receives a presentment warranty from the person obtaining acceptance that the draft has not been altered.
D) All of these statement are true of warranty liability.
Warranty Liability
Legal obligation arising from warranty promises that ensure a product or service meets certain standards and conditions.
Negotiable Instruments
Written documents guaranteeing the payment of a specific amount of money, either on demand or at a set time, which can be transferred by endorsement.
Drawee
The party in a financial transaction who is directed to pay a certain sum of money in a draft or check, typically a bank.
- Understand the guarantees provided by a person transferring a negotiable instrument.
Verified Answer
KV
Khushbu VhoraMay 29, 2024
Final Answer :
D
Explanation :
All the statements (A, B, and C) accurately describe aspects of warranty liability in the context of negotiable instruments. Warranty liability indeed applies to any person who transfers an instrument for consideration (A), a drawee of an unaccepted draft who pays in good faith receives a presentment warranty from the person obtaining payment and all prior transferors (B), and a drawee who accepts an instrument in good faith receives a presentment warranty that the draft has not been altered (C).
Learning Objectives
- Understand the guarantees provided by a person transferring a negotiable instrument.