Iowa Code

Iowa Code § 554.3406 (2026)

Negligence contributing to forged signature or alteration of instrument

✓ current as of July 2026

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1. 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.

2. Under subsection 1, 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.

3. Under subsection 1, the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection 2, the burden of proving failure to exercise ordinary care is on the person precluded. 94 Acts, ch 1167, §53, 121, 122 Referred to in §554.3417, 554.4208 \n

Notes of Decisions

Cited in 2 cases, 1989–1992 · leading case: Waukon Auto Supply v. Farmers & Merchants Sav. Bank, 440 N.W.2d 844 (Iowa 1989).

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Waukon Auto Supply v. Farmers & Merchants Sav. Bank, 440 N.W.2d 844 (Iowa 1989). · cites it 8× “The Bank asserts the district court erred in concluding that Waukon Auto’s allegedly negligent business practices did not provide an affirmative defense under Iowa Code section 554.3406. Once again, we disagree.”

Husker News Co. v. South Ottumwa Sav. Bank, 482 N.W.2d 404 (Iowa 1992). · cites it 4× “For their second response the banks point out that they are entitled to dismissal under Iowa Code section 554.3406 which provides: Any person whose negligence substantially contributes to .”

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