Section 3--417. Warranties on Presentment and Transfer

(1)  Any  person  who  obtains  payment  or  acceptance  and any prior
  transferor warrants to a person who in good faith pays or accepts that
         (a) he has a good title to the instrument  or  is  authorized  to
             obtain  payment or acceptance on behalf of one who has a good
             title; and
         (b) he has no knowledge that the signature of the maker or drawer
             is unauthorized, except that this warranty is not given by  a
             holder in due course acting in good faith
             (i) to a maker with respect to the maker's own signature; or
            (ii) to  a  drawer with respect to the drawer's own signature,
                 whether or not the drawer is also the drawee; or
           (iii) to an acceptor of a draft if the  holder  in  due  course
                 took  the  draft  after  the  acceptance  or obtained the
                 acceptance without knowledge that the drawer's  signature
                 was unauthorized; and
         (c) the  instrument  has not been materially altered, except that
             this warranty is not given by a holder in due  course  acting
             in good faith
             (i) to the maker of a note; or
            (ii) to  the  drawer  of  a draft whether or not the drawer is
                 also the drawee; or
           (iii) to the acceptor of a draft with respect to an  alteration
                 made  prior to the acceptance if the holder in due course
                 took the draft after  the  acceptance,  even  though  the
                 acceptance  provided  "payable  as  originally  drawn" or
                 equivalent terms; or
            (iv) to the acceptor of a draft with respect to an  alteration
                 made after the acceptance.
    (2)  Any person who transfers an instrument and receives consideration
  warrants to his transferee and if the transfer is by indorsement to  any
  subsequent holder who takes the instrument in good faith that
         (a) he  has  a  good  title to the instrument or is authorized to
             obtain payment or acceptance on behalf of one who has a  good
             title and the transfer is otherwise rightful; and
         (b) all signatures are genuine or authorized; and
         (c) the instrument has not been materially altered; and
         (d) no defense of any party is good against him; and
         (e) he  has  no knowledge of any insolvency proceeding instituted
             with respect to the maker or acceptor or  the  drawer  of  an
             unaccepted instrument.
    (3)  By  transferring  "without  recourse"  the  transferor limits the
  obligation stated in subsection (2) (d) to a warranty  that  he  has  no
  knowledge of such a defense.
    (4)  A  selling agent or broker who does not disclose the fact that he
  is acting only as such gives the warranties provided  in  this  section,
  but  if  he  makes  such  disclosure  warrants  only  his good faith and
  authority.