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Transfer warranty refers to an implied promise relating to the title and credibility of an instrument made by a transferor to a transferee. Generally, a transfer warranty is made for transfers through indorsement. A transfer warranty can also be granted to any remote transferee through indorsement of an instrument. If a transfer is made without any indorsement, then only an immediate transferee is granted transfer warranty by a transferor. [Leonard Smith, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, 129 A.D.2d 397 (N.Y. App. Div. 3d Dep't 1987)].
The following are the five warranties prescribed by a transfer warranty:
1.That a transferor has good title ;
2.That all signatures are genuine and authorized ;
3.That an instrument has not been materially altered ;
4.That no defenses of any party are good against the transferor ;and
5.That a transferor has no knowledge of any insolvency proceeding against a maker or acceptor or drawer.