UNIFORM COMMERCIAL CODE
Act 174 of 1962
440.3406 Failure to exercise ordinary care contributing to alteration or forged instrument; allocation of loss; burden of proof.
Sec. 3406.
(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.
History: 1962, Act 174, Eff. Jan. 1, 1964 ;-- Am. 1993, Act 130, Eff. Sept. 30, 1993
Notes of Decisions
John Hancock Fin. Servs., Inc. v. Old Kent Bank, 185 F. Supp. 2d 771 (E.D. Mich. 2002).
· cites it 19× “Rather, Old Kent argues that John Hancock’s claim is precluded, under § 440.3406 of the UCC, to the extent that its negligent supervision of Sherman contributed to Sherman’s forged indorsement of the checks.”
Matco Tools Corp. v. Pontiac State Bank, 614 F. Supp. 1059 (E.D. Mich. 1985).
· cites it 2× “MCLA § 440.3406. By its own terms, section 3-406 is unavailable as a defense unless the party asserting it has paid the instrument in good faith and in accordance with reasonable commercial standards.”
John Hancock Fin. Servs., Inc. v. Old Kent Bank, 346 F.3d 727 (6th Cir. 2003).
“UCC § 3-406 provides in pertinent part that a party whose negligence “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…”
Laura Abbonizio v. Bank of Am. Na (Mich. Ct. App. 2017).
· cites it 3× “1 In contrast, MCL 440.3406 “limits the preclusion defense to instances in which ‘an alteration of an instrument’ or ‘the making of a forged signature’ occurs.”
Laura Abbonizio v. Bank of Am. Na (Mich. Ct. App. 2017).
· cites it 3× “1 In contrast, MCL 440.3406 “limits the preclusion defense to instances in which ‘an alteration of an instrument’ or ‘the making of a forged signature’ occurs.”
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