Question

1. Discuss whether an authorized agent can be held personally liable on a note if the agent did not sign his or her own name. Also discuss the kind of personal liability an agent has who simply signs his or her name to an instrument.

Answer 1

Ans: The authorized agent cannot be liable if he or she did not sign his or her own name to the instrument (UCC 3-401). If the authorized agent simply signs her own name to the instrument, she might be liable. If the holder of the instrument is a holder in due course and is not aware and does not have reason to know that the agent has signed on behalf of a principal, the agent may be held personally liable. If the holder of the instrument is not a holder in due course, the agent can usually escape liability by demonstrating that is was not the intent of the principal to hold the agent personally responsible. There is an exception to agent liability. Even if the holder is a holder in due course and the agent simply signed his name, the agent will not be liable under specific conditions. If the instrument is a check payable from the principal’s account and the principal is clearly identified on the check, the agent will not be liable on the check (UCC 3-402(c)). Finally, the agent can be personally liable if he was not authorized to sign on behalf of the principal. This unauthorized writing falls into a broader category of unauthorized signatures.]Unauthorized Signatures and Endorsements [As a general rule, if a signature to a negotiable instrument is unauthorized, this unauthorized signature will not impose liability to the named party. This rule applies to two cases: forgery and unauthorized agents. Suppose you forged your business law professor’s name to ensure that you would get your money to start your new business. If you could not pay on the note, your business law professor would not be forced to pay on the basis of the forged signature. Similarly, this rule applies to parties who forge the drawer’s signature on a check.If an agent is not authorized to sign a negotiable instrument on behalf of a principal, the principal will generally not be liable for the instrument; however, if the principal will then become liable for the instrument while the agent will escape personal liability (UCC 3-403(a)).