Tennessee Code Annotated
Tenn. Code Ann. § 47-3-406 (2026)
Negligence contributing to forged signature or alteration of instrument
✓ current as of May 2026
- (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 1995, ch. 397, § 2.
Notes of Decisions
Cited in 11
cases, 1966–2012 · leading case: Bank/First Citizens Bank v. Citizens & Assocs., 82 S.W.3d 259 (Tenn. 2002).
Bank/First Citizens Bank v. Citizens & Assocs., 82 S.W.3d 259 (Tenn. 2002). “Tenn. Code Ann. § 47-3-406 (a). However, even if Citizens and Associates is found to be precluded from asserting the entire loss against First Citizens Bank, it may nevertheless seek to shift the burden of the loss to the bank by showing (1) that First Citizens Bank failed to…”
C-Wood Lumber Co. v. Wayne Cnty. Bank, 233 S.W.3d 263 (Tenn. Ct. App. 2007). “The court decided that C-Wood’s negligence claims were governed by the comparative fault principles in Tenn.Code Ann. § 47-3-406(b) (2001). Accordingly, the trial court denied C-Wood any recovery because its fault after 1991 exceeded any fault that could be attributed to the…”
Notredan, LLC v. Old Repub. Exch. Facilitator Co., 875 F. Supp. 2d 780 (W.D. Tenn. 2012). “Plaintiff has also cited in its brief Tenn.Code Ann. § 47-3-406 in support of a claim that Defendant negligently contributed to a forged endorsement.”
Vending Chattanooga, Inc. v. Am. Nat'l Bank & Trust Co., 730 S.W.2d 624 (Tenn. 1987). “Since the Uniform Commercial Code did not become effective in Tennessee until July 1, 1964, the Jackson case first discussed the Uniform Negotiable Instruments law, but, as to those checks involved after July 1, 1964, then held that two sections of the Uniform Commercial Code,…”
Inventory Locator Serv., Inc. v. Dunn, 776 S.W.2d 523 (Tenn. Ct. App. 1989). “The ultimate issue as to both rulings is whether CBG acted in good faith and in a commercially reasonable manner pursuant to T.C.A. §§ 47-3-406 and 47-3-419, in dealing with stolen, forged checks deposited in a phony corporate account opened at its main branch by defendant…”
Kaley Ex Rel. Lanham v. Union Planters Nat'l Bank of Memphis, 775 S.W.2d 607 (Tenn. Ct. App. 1988). “…in good faith and in accordance with the reasonable commercial standards of the drawee's or payor's business. Tenn. Code Ann. § 47-3-406 (1979).”
Jackson Ex Rel. Greater St. Matthews Baptist Church v. First Nat'l Bank of Memphis, Inc., 403 S.W.2d 109 (Tenn. Ct. App. 1966). “, which is section 23 of the Uniform Negotiable Instruments Law, and sections 47-3-406 and 47-4-406 T.C.A., which are sections 3-406 and 4-406 of the Uniform Commercial Code.”
Contour Indus., Inc. v. U.S. Bank, N.A., 437 F. App'x 408 (6th Cir. 2011). “The Tennessee Supreme Court also discussed the meaning of good faith in First Citizens Bank, where a depository bank asserted the negligent drawer defense under Tenn.Code Ann. § 47-3-406 against a claim for conversion.”
The Bank/First Citizens Bank v. Citizens & Assocs., Allied Mortg. Capital Corp., Frieda Gray, & Henry Gray, A/K/A James Gray, First Tennessee Bank (Tenn. Ct. App. 2001). “E2000-02545-COA-R3-CV Drawer of checks and Bank failed to exercise ordinary care in transactions under Tenn. Code Ann. §47-3-406 . Drawer was assessed 80% of fault and Bank 20%.”
The Bank/First Citizens Bank v. Citizens & Assocs. - Concurring/Dissenting (Tenn. Ct. App. 2001). “In my judgment, Citizens did not engage in negligent conduct that substantially contributed to the forgery, as that concept is embodied in T.C.A. § 47-3-406. Accordingly, I would hold that the Bank, who was clearly negligent in allowing checks made payable to a business to be…”
Citizens First Bank v. Andrew N. Hall (Tenn. Ct. App. 2005). “Inquiries as to the application of the Statute, T.C.A. § 47-3-406 are highly factual. See, Bank/First Citizens Bank v.”
— Tenn. Code Ann. § 47-3-406(a) — 3 cases
Bank/First Citizens Bank v. Citizens & Assocs., 82 S.W.3d 259 (Tenn. 2002). “Tenn. Code Ann. § 47-3-406 (a). However, even if Citizens and Associates is found to be precluded from asserting the entire loss against First Citizens Bank, it may nevertheless seek to shift the burden of the loss to the bank by showing (1) that First Citizens Bank failed to…”
Notredan, LLC v. Old Repub. Exch. Facilitator Co., 875 F. Supp. 2d 780 (W.D. Tenn. 2012). “Plaintiff has also cited in its brief Tenn.Code Ann. § 47-3-406 in support of a claim that Defendant negligently contributed to a forged endorsement.”
Contour Indus., Inc. v. U.S. Bank, N.A., 437 F. App'x 408 (6th Cir. 2011). “The Tennessee Supreme Court also discussed the meaning of good faith in First Citizens Bank, where a depository bank asserted the negligent drawer defense under Tenn.Code Ann. § 47-3-406 against a claim for conversion.”
— Tenn. Code Ann. § 47-3-406(b) — 2 cases
C-Wood Lumber Co. v. Wayne Cnty. Bank, 233 S.W.3d 263 (Tenn. Ct. App. 2007). “The court decided that C-Wood’s negligence claims were governed by the comparative fault principles in Tenn.Code Ann. § 47-3-406(b) (2001). Accordingly, the trial court denied C-Wood any recovery because its fault after 1991 exceeded any fault that could be attributed to the…”
Bank/First Citizens Bank v. Citizens & Assocs., 82 S.W.3d 259 (Tenn. 2002). “Tenn. Code Ann. § 47-3-406 (a). However, even if Citizens and Associates is found to be precluded from asserting the entire loss against First Citizens Bank, it may nevertheless seek to shift the burden of the loss to the bank by showing (1) that First Citizens Bank failed to…”
— Tenn. Code Ann. § 47-3-406(c) — 1 case
Bank/First Citizens Bank v. Citizens & Assocs., 82 S.W.3d 259 (Tenn. 2002). “Tenn. Code Ann. § 47-3-406 (a). However, even if Citizens and Associates is found to be precluded from asserting the entire loss against First Citizens Bank, it may nevertheless seek to shift the burden of the loss to the bank by showing (1) that First Citizens Bank failed to…”
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