Warranty liability does not arise when a party delivers a bearer instrument because a holder cannot hold the party liable on his or her signature on the instrument.

Question

Quizplus · Accepted Answer

Warranty liability can arise when a party transfers a bearer instrument. The transferor, by transferring the instrument, warrants to any subsequent holder that the instrument has not been altered and that the transferor has no knowledge of any insolvency proceedings against the maker, acceptor, or drawer.

Warranty Liability Does Not Arise When a Party Delivers a Bearer