A person who transfers an instrument for consideration makes certain warranties to the transferee.

Question

Quizplus · Accepted Answer

This is because there are certain implied warranties that come with the transfer of an instrument for consideration, such as the warranty of title (i.e. the transferor has good title to the instrument) and the warranty against prior endorsements (i.e. the transferor has not endorsed the instrument to someone else before transferring it to the transferee). These warranties are meant to protect the transferee from any defects in the instrument or title.

A Person Who Transfers an Instrument for Consideration Makes Certain