Sara has a checking account at Charter Bank. Ethan steals one of her blank checks, writes a check for $250 to himself, and then forges Sara's signature. Ethan then indorses the instrument to Paul in payment of a debt. Paul, who does not know of the forgery, presents the instrument to Charter Bank for payment. At Charter Bank's request, Paul indorses the instrument, and the bank then pays him $250. Which of the following is correct?
A) Paul has breached the warranties on presentment.
B) Ethan has breached the warranties on presentment.
C) Sara has breached the warranties on presentment.
D) Both Paul and Ethan have breached the warranties on presentment .

Question

Quizplus · Accepted Answer

Ethan has breached the warranties on presentment because he is the one who forged Sara's signature and then transferred the check to Paul. The act of forging the signature and presenting the check as if it were legitimately signed breaches the warranty that the instrument has not been altered and that the signer has the authority to endorse the instrument. Paul, not knowing of the forgery, does not breach the warranty on presentment.

Sara Has a Checking Account at Charter Bank