Printable Format84-3-406. Negligence contributing to forged signature or alteration of instrument. (a) A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection.
(b) Under subsection (a), if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.
(c) Under subsection (a), the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (b), the burden of proving failure to exercise ordinary care is on the person precluded.
History: L. 1991, ch. 296, § 43; February 1, 1992.
KANSAS COMMENT, 1996
This section is identical to the 1995 Official Text. This section is derived from the former 84-3-406, and is substantially similar since the definition of "good faith" in 84-3-103(4) requires reasonable commercial standards of fair dealing. The section has been amended to incorporate comparative negligence, as has 84-3-404 and 84-3-405 encouraging settlements. Historical case and statutory references can be obtained from the 1965 and 1983 bound volume 7 of the Kansas Statutes Annotated.
This section states the general negligence and comparative negligence standards regarding forgeries or alterations on instruments. Unlike 84-3-404 and 84-3-405, negligence must be shown, and the burden of proof for negligence and for comparative negligence is on the one so alleging.
The classic cases involving negligence substantially contributing to the wrong doing in business transactions involve failures to properly sequester checks and check signing machines. In the private context the negligence generally occurs in leaving blanks where additional amounts can be inserted.
Revisor's Note:
Former section 84-3-406 was repealed by L. 1991, ch. 296, § 111 and the number reassigned to the current text.
CASE ANNOTATIONS
1. Whether retailer's employees who allegedly forged signatures on financial documents had duty to renounce and reclaim examined. Deere and Co. v. Zahm, 837 F. Supp. 346, 352 (1993).
2. Whether bank's position customer was liable for checks forged by customer's employees violated good faith duty examined. In re Mid-American Clean Water Systems, Inc., 159 B.R. 941, 946 (1993).