Accommodation Parties & Authorized Agents’ Signatures.

Accommodation Parties

Signs instrument to lend name as credit to another party on the instrument.

ü Makers v. Indorsers.

Authorized Agents’ Signatures

ü Agent agrees to act for Principal.

ü Agents can hold Principal liable if authorized to sign.

ü Principal must be clearly named.

ü Agent is personally liable when Principal is not named or disclosed, unless check is drawn on Principal’s account.

Case 26.2:  Caraway v. Land Design Studio (2001).

Unauthorized Signatures

Forgery does not bind owner but Bank is liable.

If Agent has no authority, Agent is personally liable, but Principal is not, unless ratified.

Exceptions:

§ Ratification of signature.

§ Negligence of party.

§ Holder in Due Course.

Special Rules for Unauthorized Indorsements

Unauthorized indorsement does not bind maker/drawer except:

§ “Imposter Rule”: imposter induces maker/drawer to issue check to imposter.

§ When imposter signs as/on behalf of maker/drawer intending payee has no interest in the instrument.

§ Fictitious Payee.