Forged Negotiable Instrument and Holder Status - Explained
How does a Forged Instrument Affect the Rights of a Holder?
Written by J. Mance Gordon
Updated at April 19th, 2024
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What is the result if a negotiable instrument is forged?
A forged negotiable instrument is not enforceable against the party whose name was forged. The forged instrument is, however, enforceable against the forger. Basically, the instrument is treated as though the forger signed her own signature. Also, a forged negotiable instrument puts affirmative duties on parties implicated in the forgery.
For example, a drawee bank on a forged check must use ordinary care in inspecting a potentially forged signature when paying check. The owner of the check may be liable if the check is stolen and forged because of her own negligence. The owner has a duty to verify records to identify forged instruments. The drawer is barred from contesting improper payment of the check by a one-year statute of limitations.
Related Topics
- Commercial Paper (Intro)
- What is Commercial Paper?
- Negotiable Instrument
- What are the common types of commercial paper?
- Promissory Note
- Cashier's Check
- Convenience Check
- Certified Check
- Substitute Check
- Bill of Exchange
- Bank Draft Definition
- Sight Draft Definition
- Bankers Acceptance
- Who is a Holder of a negotiable instrument?
- Commercial Paper Funding Program
- What is Negotiability and why is it important?
- What is required for commercial paper to be negotiable?
- Sum Certain (Contracts)
- Inflation Adjustment Clause
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- Bearer Form
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- What is Indorsement of a negotiable instrument?
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- Bank Endorsement
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- What rules apply if a holder loses a negotiable instrument?
- When is payment of a negotiable instrument overdue?
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- What is a holder in due course?
- What are the requirements for a holder to become a holder in due course?
- Receive an instrument for value?
- Receive an instrument in good faith?
- Receive an instrument without notice of a valid defense?
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- What is the Shelter Rule?
- Can you limit a transferee from becoming a holder in due course?
- Personal Defenses?
- Real Defenses?
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- What are the rights of a holder in due course if the instrument involves a consumer transaction?
- What happens if a negotiable instrument is Forged?
- What happens if a negotiable instrument is Stolen?
- Guaranty or Guarantee
- Letter of Guarantee
- Personal Guarantee
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What is the role of a Guarantor or Surety of a negotiable instrument?
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Surety
- Cosign
- Accommodation Paper Definition
- Secondary Liability
- Avalize Definition
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- What is Indorser Warranty of a negotiable instrument?
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