Article 3 — Negotiable Instruments · Section 3-404
This guide provides an overview of UCC § 3-404, addressing the liability of persons who sign negotiable instruments.
Source: U.C.C. § 3-404
A person is not liable on an instrument unless his signature appears thereon. If a signature is made by an agent, the principal is bound, but the agent is not liable on the instrument unless he expressly indicates that he is signing in a representative capacity.
UCC § 3-404 addresses who is liable on negotiable instruments, specifically stating that a person cannot be held liable unless their signature is on the instrument. Additionally, if an agent signs on behalf of a principal, the principal is liable unless the agent explicitly denotes their representative status.
A signed document promising a sum of payment to a specified person or the bearer.
A person authorized to act on behalf of another.
The person on whose behalf an agent acts.
Example 1
A check signed by a bank officer, where the officer's signature clearly indicates their capacity as an employee, makes the bank liable, while the officer isn't personally liable.
Example 2
If a real estate agent signs a purchase agreement, and they sign ‘John Smith, Agent for Jane Doe’, only Jane Doe is liable on the agreement.