PARRIS N. GLENDENING, Governor

Ch. 91

(E) A CAUSE OF ACTION FOR BREACH OF WARRANTY UNDER THIS SECTION
ACCRUES WHEN THE CLAIMANT HAS REASON TO KNOW OF THE BREACH.

4-208.

(A)    IF AN UNACCEPTED DRAFT IS PRESENTED TO THE DRAWEE FOR
PAYMENT OR ACCEPTANCE AND THE DRAWEE PAYS OR ACCEPTS THE DRAFT, (I)
THE PERSON OBTAINING PAYMENT OR ACCEPTANCE, AT THE TIME OF
PRESENTMENT, AND (II) A PREVIOUS TRANSFEROR OF THE DRAFT, AT THE TIME OF
TRANSFER, WARRANT TO THE DRAWEE THAT PAYS OR ACCEPTS THE DRAFT IN
GOOD FAITH THAT:

(1)     THE WARRANTOR IS, OR WAS, AT THE TIME THE WARRANTOR
TRANSFERRED THE DRAFT, A PERSON ENTITLED TO ENFORCE THE DRAFT OR
AUTHORIZED TO OBTAIN PAYMENT OR ACCEPTANCE OF THE DRAFT ON BEHALF OF
A PERSON ENTITLED TO ENFORCE THE DRAFT;

(2)     THE DRAFT HAS NOT BEEN ALTERED; AND

(3)     THE WARRANTOR HAS NO KNOWLEDGE THAT THE SIGNATURE OF
THE PURPORTED DRAWER OF THE DRAFT IS UNAUTHORIZED.

(B)     A DRAWEE MAKING PAYMENT MAY RECOVER FROM A WARRANTOR
DAMAGES FOR BREACH OF WARRANTY EQUAL TO THE AMOUNT PAID BY THE
DRAWEE LESS THE AMOUNT THE DRAWEE RECEIVED OR IS ENTITLED TO RECEIVE
FROM THE DRAWER BECAUSE OF THE PAYMENT. IN ADDITION, THE DRAWEE IS
ENTITLED TO COMPENSATION FOR EXPENSES AND LOSS OF INTEREST RESULTING
FROM THE BREACH. THE RIGHT OF THE DRAWEE TO RECOVER DAMAGES UNDER
THIS SUBSECTION IS NOT AFFECTED BY ANY FAILURE OF THE DRAWEE TO
EXERCISE ORDINARY CARE IN MAKING PAYMENT. IF THE DRAWEE ACCEPTS THE
DRAFT (I) BREACH OF WARRANTY IS A DEFENSE TO THE OBLIGATION OF THE
ACCEPTOR, AND (II) IF THE ACCEPTOR MAKES PAYMENT WITH RESPECT TO THE
DRAFT, THE ACCEPTOR IS ENTITLED TO RECOVER FROM A WARRANTOR FOR
BREACH OF WARRANTY THE AMOUNTS STATED IN THIS SUBSECTION.

(C)     IF A DRAWEE ASSERTS A CLAIM FOR BREACH OF WARRANTY UNDER
SUBSECTION (A) BASED ON AN UNAUTHORIZED INDORSEMENT OF THE DRAFT OR
AN ALTERATION OF THE DRAFT, THE WARRANTOR MAY DEFEND BY PROVING THAT
THE INDORSEMENT IS EFFECTIVE UNDER § 3-404 OR § 3-405 OR THE DRAWER IS
PRECLUDED UNDER § 3-406 OR § 4-406 FROM ASSERTING AGAINST THE DRAWEE THE
UNAUTHORIZED INDORSEMENT OR ALTERATION.

(D)    IF (I) A DISHONORED DRAFT IS PRESENTED FOR PAYMENT TO THE
DRAWER OR AN INDORSER OR (II) ANY OTHER ITEM IS PRESENTED FOR PAYMENT
TO A PARTY OBLIGED TO PAY THE ITEM, AND THE ITEM IS PAID, THE PERSON
OBTAINING PAYMENT AND A PRIOR TRANSFEROR OF THE ITEM WARRANT TO THE
PERSON MAKING PAYMENT IN GOOD FAITH THAT THE WARRANTOR IS, OR WAS, AT
THE TIME THE WARRANTOR TRANSFERRED THE ITEM, A PERSON ENTITLED TO
ENFORCE THE ITEM OR AUTHORIZED TO OBTAIN PAYMENT ON BEHALF OF A
PERSON ENTITLED TO ENFORCE THE ITEM. THE PERSON MAKING PAYMENT MAY

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