Article 3 — Negotiable Instruments · Section 3-413
This section discusses the liability of endorsers on negotiable instruments under the UCC.
Source: U.C.C. § 3-413
An endorser of a negotiable instrument is liable on the instrument according to its terms at the time of the endorsement and also, in the case of any negotiable instrument, to the holder and all subsequent holders who take it without notice of a defect.
UCC § 3-413 establishes that endorsers of negotiable instruments are responsible for their obligations as outlined in the instrument when they endorse it. This means that if the instrument is not paid, the endorser can be held liable by the holder.
A person who signs a negotiable instrument, thereby transferring the rights to another.
A person in possession of a negotiable instrument that is payable either to bearer or to an identified person.
Example 1
If Alice endorses a check made out to her and passes it to Bob, she is liable to Bob if the check bounces.
Example 2
When Charlie endorses a promissory note for a loan he took out and later defaults, the bank can pursue Charlie for payment.