(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.
(Acts 1965, No. 549, p. 811; repealed by Acts 1995, No. 95-668, p. 1381, §1; added by Acts 1995, No. 95-668, p. 1381, §1.)
Notes of Decisions
Amsouth Bank, N.A. v. Spigener, 505 So. 2d 1030 (Ala. 1986).
· cites it 3× “AmSouth denies both allegations and has asserted in defense § 7-3-406, which provides: " Negligence contributing to alteration or unauthorized signature.”
Braden Furniture Co. v. Union State Bank, 109 So. 3d 625 (Ala. 2012).
· cites it 2× “With regard to [Braden Furniture’s] claims under the Alabama Uniform Commercial Code, [Braden Furniture] amended [its] complaint to make claims pursuant to Alabama Code § 7-3-404, § 7-3-405, § 7-3-406.... Based on the allegations in the complaint and *627 the undisputed evidence…”
Trust Co. Bank v. Bronner, 451 So. 2d 247 (Ala. 1984).
· cites it 3× “The trial court found that Trust Company Bank did not meet its burden of proof under Code 1975, § 7-3-406, as to negligence by TRS in issuing the cheeks in question.”
Wells Fargo Bank, N.A. v. Nat'l Bank of Com., 240 So. 3d 541 (Ala. 2017).
“Code 1975,] or the drawer is precluded under Section 7-3-406 or 7-4-406[, Ala. Code 1975,] from asserting against the drawee the unauthorized indorsement or alteration.”
The Bank/First Citizens Bank v. Citizens & Assocs. - Concurring/Dissenting (Tenn. Ct. App. 2001).
“The Supreme Court of Alabama reversed the grant of summary judgment to the defendant bank, noting that “[a]lthough the trial court discussed a number of facts that indicated negligence on the part of [the drawer bank], and although those facts might be found to have proximately…”
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