(a) A person whose failure to exercise ordinary care 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) of this section, if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure 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) of this section, the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (b) of this section, the burden of proving failure to exercise ordinary care is on the person precluded.
Source: L. 94: Entire article R&RE, p. 865, § 1, effective January 1, 1995.
Editor's note: This section is similar to former § 4-3-406 as it existed prior to 1994.
Notes of Decisions
Cited in
10
cases, 1984–2016 · leading case:
Willey v. Mayer, 876 P.2d 1260 (Colo. 1994).
Willey v. Mayer, 876 P.2d 1260 (Colo. 1994).
· cites it 38× “It found, however, that Western Slope and Mayer were precluded under section 4-3-406, 2 C.R.S. (1992), of the Colorado Uniform Commercial Code (UCC), from asserting Rhodes' lack of authority to sign Mayer's name to the note because Mayer's failure to terminate the power of…”
Liberty Mortg. Corp. v. Fiscus, 379 P.3d 278 (Colo. 2016).
· cites it 6× “See § 4-3-406 emt. 8. Rather, it was an active effort on Wife's part to encumber the property without Husband's knowledge.”
Cent., Inc. v. Cache Nat'l Bank, 748 P.2d 351 (Colo. Ct. App. 1987).
· cites it 5× “Section 4-3-406, C.R.S., provides that, if a bank that has committed a conversion as defined in § 4-3-419(l)(c), has, nevertheless, paid the instrument involved “in good faith and in accordance with the reasonable commercial standards,” it may avoid liability by proving that a…”
Vectra Bank of Englewood v. Bank W., 890 P.2d 259 (Colo. Ct. App. 1995).
· cites it 6× “However, claims brought by a payor bank, such as Vectra, against a collecting bank, such as Bank Western, may be subject to the defense set forth in § 4-3-406, C.R.S. (1992 Repl.Vol. 2). See Union Bank & Trust Co.”
Willey v. Mayer, 862 P.2d 959 (Colo. Ct. App. 1993).
· cites it 6× “The record also reflects that Mayer is not precluded from asserting Rhodes’ lack of authority to sign the note on his behalf pursuant to § 4-3-406, C.R.S. (1992 Repl. Vol. 2), which provides as follows: Any person who by his negligence substantially contributes to a material…”
Bill Manning, Inc. v. Denver West Bank & Trust, 697 P.2d 403 (Colo. Ct. App. 1984).
· cites it 5× “standard and found against the bank on disputed evidence. In view of the bank’s election not to appeal on the issue of its liability for repayment of the amounts it paid out on the forged withdrawal slips, we need not address the issue whether the trial court applied the proper…”
Weil v. First Nat'l Bank of Castle Rock, 983 P.2d 812 (Colo. Ct. App. 1999).
“Cache National Bank asserted affirmative defenses under §§ 4-3-406 and 4-3-419(3), C.R.S. 1998, thus raising the issue whether its actions comported with reasonable commercial banking standards.”
Liberty Mortg. Corp. v. Fiscus, 2016 CO 31 (Colo. 2016).
· cites it 34× “Section 4-3-406, C.R.S. (2015), precludes a person from asserting that his signature was forged on a negotiable instrument if his own negligence contributed to the alleged forgery.”
Decibel Credit Union v. Pueblo Bank & Trust Co., 996 P.2d 784 (Colo. Ct. App. 2000).
· cites it 2× “Decibel also relies upon § 4-3-406, C.R.S. 1999, of the Uniform Commercial Code which addresses negligence contributing to a forged signature.”
— Colo. Rev. Stat. § 4-3-406(a) — 1 case
Liberty Mortg. Corp. v. Fiscus, 2016 CO 31 (Colo. 2016).
“Section 4-3-406, C.R.S. (2015), precludes a person from asserting that his signature was forged on a negotiable instrument if his own negligence contributed to the alleged forgery.”
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