Forged Indorsements

Abstract

While the Anglo-American and the Continental legal systems have the same rules with respect to the effects of a forgery of the drawer's signature, there is a striking difference between them in their attitude toward a forged indorsement. Under the Uniform Codes on Bills of Exchange and Checks, which were drafted in Geneva in 1931 and 1932 and have been adopted in most of the civil law countries, a holder acquiring an instrument in good faith and without gross negligence by an uninterrupted series of indorsements has good title even in a case where the instrument was lost or stolen and one of the signatures forged. As a corollary to this rule, the drawee is bound only to examine the external regularity of the chain of indorsements and is discharged if he pays in good faith to a holder who can establish his title by an uninterrupted series of indorsements. The Anglo-American law, on the other hand, provides generally that a forged signature in an indorsement is wholly inoperative, although the English Bills of Exchange Act makes an exception to this rule in favor of the drawee-banker in regard to checks and other demand drafts.