Fanny signs a note "payable to the order of Guaranty Bank." Guaranty indorses the note in blank and negotiates it to Haji,who sells it to Iona.Liability associated with the transfer of the note from Haji to Iona is

Question

Quizplus · Accepted Answer

The liability associated with the transfer of the note from Haji to Iona is warranty liability. This is because when Guaranty Bank indorsed the note in blank, they provided a warranty that they had the right to transfer the note and that it was free from any undisclosed defects or claims. Haji, in turn, also provided a warranty to Iona that they were transferring a note that was free from any undisclosed defects or claims. If any such defects or claims later arise, Haji may be held liable for breach of warranty.

Fanny Signs a Note "Payable to the Order of Guaranty