Article 3 — Negotiable Instruments · Section 3-402
This section outlines the liability of an agent signing a negotiable instrument on behalf of a principal.
Source: U.C.C. § 3-402
UCC § 3-402 states that an authorized representative who signs a negotiable instrument may be held liable on the instrument unless the signature indicates that the representative is acting in a representative capacity. In such cases, the liability falls on the principal, not the agent.
This section explains that if an agent signs a negotiable instrument (like a check) on behalf of their principal (the person they represent), the agent may be liable unless they clearly indicate they are signing as the agent. If done correctly, the responsibility rests with the principal, not the agent.
An individual authorized to act on behalf of another (the principal) in transactions.
A signed document that promises a sum of payment to a specific person or the bearer, such as checks, promissory notes, and drafts.
The person or entity that authorizes an agent to act on their behalf.
Example 1
If Jane signs a check as 'Jane Doe, Agent for XYZ Corp.' the check may hold XYZ Corp. liable instead of Jane, as long as her agency is clear.
Example 2
If John signs a promissory note simply as 'John Smith', he may be personally liable unless he clearly indicates he is signing on behalf of another party.