Article 3 — Negotiable Instruments · Section 3-403
This section outlines the authority of individuals to bind themselves to negotiable instruments and highlights the implications of unauthorized signatures.
Source: U.C.C. § 3-403
A signature is binding on a party who has authorized it. If a signature is unauthorized, it is not binding on the party whose name is signed, unless the unauthorized signer has the authority or the party is otherwise liable.
UCC § 3-403 establishes that a party is generally bound by a signature they authorize, but if a signature is made without proper authorization, it typically does not bind the party whose name is signed. However, there are exceptions where liability can still attach under certain conditions.
A signature that a person has given permission for another to use, binding the person to the obligations expressed in the instrument.
A signature made without the consent of the person whose name is signed, generally not binding them to the obligations of the instrument.
Example 1
A check signed by a bank employee who was authorized to sign on behalf of the bank binds the bank to the check.
Example 2
If Lila signs her husband’s name to a contract without his permission, that signature is unauthorized, and her husband is not bound by that contract, unless he later ratifies the contract.