Generally, when an indorsement is forged or unauthorized, the burden of loss falls on the first party to take the instrument with the forged or unauthorized indorsement. The reason for his general rule is that the first party to take an instrument is in the best position to prevent the loss.
When an instrument has a forged indorsement the loss usually falls on the party whose indorsement was forged?
The loss for a forged indorsement usually falls on the first party to take the instrument with a forged signature. However, there are three important exceptions to this general rule: the imposter rule, the fictitious payee rule, and the dishonest employee rule.
Who may be secondarily liable on an instrument?
An individual who signs an instrument is either primarily or secondarily liable for payment. Primary liability is extended to the person who is expected to pay first, and the individual who is legally responsible to pay upon the failure of the first party to do so is secondarily liable.
What is the effect of an instrument with a forged signature?
Under Section 23 of the Negotiable Instruments Law, a forged signature in a check, whether it be that of the drawer or the payee, is wholly inoperative and no one can gain title to the instrument through it . A person whose signature was forged was never a party and never consented to the contract.
What is forgery in negotiable instrument?
FORGERY, DEFINED AND EXPLAINED
Counterfeit making or fraudulent alteration of any writing , and may consist in the signing of another's name, or the alteration of an instrument, in the name, amount, description of the person and the like, with the intent to defraud.
Generally, when an indorsement is forged or unauthorized, the burden of loss falls on the first party to take the instrument with the forged or unauthorized indorsement. The reason for his general rule is that the first party to take an instrument is in the best position to prevent the loss.
Who is primary liable on a promissory note?
As per section 32 of negotiable instrument act, in the absence of a contract to the contrary, the maker of a promissory note and the acceptor before the maturity of a bill of exchange are under the liability to pay the amount thereof at maturity.
Who is secondarily liable on a promissory note?
Primary liability is extended to the person who is expected to pay first, and the individual who is legally responsible to pay upon the failure of the first party to do so is secondarily liable. The maker of a promissory note is primarily liable, since that person is the individual who has originally promised to pay.
What happens if a negotiable instrument is discharged?
Discharge of a Negotiable Instruments
The discharge of the instrument results in extinguishment of all rights of action under it and the instrument ceases to be negotiable . After discharge of a negotiable instrument, even a holder-in-due-course acquires no right under it and he cannot bring a suit on the face of it.
What constitutes sufficient for presentment?
– Presentment for payment, to be sufficient, must be made: (a) By the holder, or by some person authorized to receive payment on his behalf; ... (d) To the person primarily liable on the instrument , or if he is absent or inaccessible, to any person found at the place where the presentment is made.
What is the legal effect of a forged indorsement?
Forged endorsements: Forged endorsements are those which contain unauthorized signatures by inappropriate authorities . Such instruments will not serve as legal instruments and cannot be enforced for release of funds.
Who can raise the defense of forgery?
— In bearer instruments, the signature of the payee or holder is unnecessary to pass title to the instrument. Hence, when the indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery against a holder in due course. 4.
What is the cut off rule?
In newspaper or magazine typography, a rule line used to separate advertisements from text or to separate different news items . All text and images are licensed under a Creative Commons License.
What is the 24 hour clearing rule?
The trial court also held that respondents should have observed the 24-hour clearing house rule that checks should be returned within 24-hours after discovery of the forgery but in no event beyond the period fixed by law for filing a legal action.
Who is liable for forged checks?
The person who forged the check is always liable to the account holder and the bank for conversion (or taking what is not yours), fraud and other causes of action. Unfortunately, by the time the forgery is discovered, the forger is usually long gone, leaving the bank and the customer to fight it out.
Is forgery a real defense?
A universal defense is a method to avoid payment of a negotiable instrument and is valid against all holders of a negotiable instrument, including a holder in due course. Forgery is an example. Against an HDC, only universal, or real, defenses can be asserted .
