Ark. Code Ann. § 4-3-402 (2020)
Signature by representative
- If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the “authorized signature of the represented person” and the represented person is liable on the instrument, whether or not identified in the instrument.
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If a representative signs the name of the representative to an instrument and the signature is an authorized signature of the represented person, the following rules apply:
- If the form of the signature shows unambiguously that the signature is made on behalf of the represented person who is identified in the instrument, the representative is not liable on the instrument.
- Subject to subsection (c), if (i) the form of the signature does not show unambiguously that the signature is made in a representative capacity or (ii) the represented person is not identified in the instrument, the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument. With respect to any other person, the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.
- If a representative signs the name of the representative as drawer of a check without indication of the representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.
History. Acts 1991, No. 572, § 5.
Research References
U. Ark. Little Rock L.J.
Survey—Business Law, 10 U. Ark. Little Rock L.J. 89.
Case Notes
Corporate Officers.
The signature of a corporation secretary on a note with the name of the corporation typed above his signature, but with nothing on the note to indicate his office or the capacity in which he signed was insufficient to avoid personal liability on the part of such officer. Fanning v. Hembree Oil Co., 245 Ark. 825, 434 S.W.2d 822 (1968) (decision under prior law).
Where the president of a corporation signed a bank note for the corporation on the face of the note, and also personally signed the note on the reverse side, the president was an endorser of the note, not a co-maker, as there was no clear indication that the note was signed in some other capacity as required by this section. Merchants Nat'l Bank v. Blass, 282 Ark. 497, 669 S.W.2d 195 (1984) (decision under prior law).
Where defendant, in signing two notes, added the handwritten title “V. Pres.” after his signatures on signature lines designated “individually”, appellate court held that, based on the language of the notes and other evidence introduced at trial, the added title was merely descriptive and did not insulate defendant from individual liability. Mollenhour v. State First Nat'l Bank, 27 Ark. App. 176, 769 S.W.2d 28 (1989) (decision under prior law).
Failure to Name Person Represented.
One who co-signed a note and contract as “trustee” without disclosing on the instrument the identity of the trust was nevertheless personally obligated to an assignee of the note. Rushton v. U.M. & M. Credit Corp., 245 Ark. 703, 434 S.W.2d 81 (1968) (decision under prior law).
Failure to Show Representative Capacity.
A corporation secretary's typing the name of the corporation above his signature on a note without anything to indicate his office or the capacity in which he signed was insufficient to avoid personal liability on the part of such officer. Fanning v. Hembree Oil Co., 245 Ark. 825, 434 S.W.2d 822 (1968) (decision under prior law).
A signature is only in a representative capacity if the name of the organization is preceded or followed by the name and office of an authorized individual; thus, although the name of the corporation preceded an individual's name, the office held by the individual was not indicated and therefore the defendant could not avoid personal liability even though he did not sign in the individual guaranty space on the reverse side of the note. United Fasteners, Inc. v. First State Bank, 286 Ark. 202, 691 S.W.2d 126 (1985) (decision under prior law).
Harmless Error.
Although a part of the instructions could be construed to be in conflict with this section, the error was harmless where the court gave this section in another instruction. Peoples Bank & Trust Co. v. Wallace, 290 Ark. 589, 721 S.W.2d 659 (1986) (decision under prior law).
Liability.
Company was liable as an endorser where it gave a bondsman actual authority to endorse its name on a check; it was irrelevant that the bondsman later misappropriated the funds. Holt Bonding Co. v. First Fed. Bank, 82 Ark. App. 8, 110 S.W.3d 298 (2003).
Parol Evidence.
In an action between the immediate parties to the instrument, this section allows an agent who has signed a negotiable instrument to introduce parol evidence to establish that personal liability on his part was not intended. Evelyn Hills Pharmacy, Inc. v. First Nat'l Bank, 289 Ark. 351, 712 S.W.2d 291 (1986) (decision under prior law).
Parol evidence may be used to show that the immediate parties intended for the named principal to be liable; therefore, although the signature on a note by an owner with a one-half interest in the pharmacy did not clearly show that the signature was on behalf of the purported principal, the parol evidence showed that all parties to the transaction intended that the pharmacy be liable as principal because part of the proceeds were used to retire an earlier corporate note and the remaining $20,000 was deposited in the pharmacy's account, and the pharmacy was held liable as principal. Evelyn Hills Pharmacy, Inc. v. First Nat'l Bank, 289 Ark. 351, 712 S.W.2d 291 (1986) (decision under prior law).
Personal Liability.
Where the guarantor signed his name after the corporate name, but there was no evidence, other than the guarantor's own statement, that he intended to sign in a representative capacity and that his failure to indicate “President” after his name was an oversight, the guarantor was personally liable. Cleveland Chem. Co. v. Keller, 19 Ark. App. 7, 716 S.W.2d 204 (1986) (decision under prior law).
Where defendant, in signing two notes, added the handwritten title “V. Pres.” after his signatures on signature lines designated “individually”, appellate court held that, based on the language of the notes and other evidence introduced at trial, the added title was merely descriptive and did not insulate defendant from individual liability. Mollenhour v. State First Nat'l Bank, 27 Ark. App. 176, 769 S.W.2d 28 (1989) (decision under prior law).
Instrument executed by a company accountant constituted a check under § 4-3-104(f)(i), and not a promissory note, because the owner of a company was the one who asked two creditors to delay presentment of the document for payment; therefore, summary judgment was properly granted in favor of the accountant, who was not personally liable for payment. Billingsley v. Smith, 85 Ark. App. 128, 147 S.W.3d 697 (2004).
Pleading.
In a suit on a promissory note, a general denial foreclosed any claimed right defendant might have under this section to show the status under which he signed the note. Chiles v. Mann & Mann, Inc., 240 Ark. 527, 400 S.W.2d 667 (1966) (decision under prior law).
Cited: Am. State Bank v. Union Planters Bank, N.A., 332 F.3d 533 (8th Cir. 2003).