Where an indorsement on an instrument has been forged or is unauthorized,the loss falls on the party who first takes the forged instrument after the forgery.

Question

Quizplus · Accepted Answer

This is known as the "forged indorsement rule" and is recognized in most jurisdictions. The rationale behind this rule is that the person who takes the forged instrument is in a better position to prevent the loss compared to the innocent party who had no involvement in the forgery.

Where an Indorsement on an Instrument Has Been Forged or Is