When a negotiable instrument is negotiated by delivery without indorsement, the warranty liability of the transferor runs:
A) only to the immediate transferee.
B) not to the immediate transferee, but to all subsequent transferees.
C) to both the immediate transferee and all subsequent transferees.
D) neither to the immediate transferee, nor to any subsequent transferees.

Question

Quizplus · Accepted Answer

When a negotiable instrument is negotiated by delivery without endorsement, it is known as a bearer instrument. In such cases, the warranty liability of the transferor runs only to the immediate transferee and not to subsequent transferees. This means that the transferor is liable to the person who received the instrument directly from him or her, but not to any other person who subsequently acquires the instrument.

When a Negotiable Instrument Is Negotiated by Delivery Without Indorsement