Contracting Around Finality: Transforming Price v. Neal from Dictate to Default

40 Pages Posted: 1 Jul 2015

See all articles by Christopher Grengs

Christopher Grengs

Government of the United States of America - Federal Trade Commission

Edward S. Adams

University of Minnesota - Twin Cities - School of Law

Date Written: 2004

Abstract

"Arguably the most important and problematic area within the entire field of negotiable instruments law is the law relating to forgery, especially the allocation of losses that result from forgery." Forgery is central to negotiable instrument law because a signature typically authenticates the orders and promises to pay on which the entire system is based. Unfortunately, forgery continues to cause substantial losses to American banks and the national economy. "Despite the significance of this problem, many of the legal doctrines governing forgery loss allocation remain quite problematic, even after nearly three centuries of development." To combat the problem of negotiable instrument fraud, this Article argues that the time-honored doctrine of finality, as embodied in the case of Price v. Neal and ยง 3-418(c) of the Revised Uniform Commercial Code (RUCC) should be transformed from a rigid, per se dictate into a default rule. This transformation would constitute a significant change in Anglo-American commercial paper law. The goal of this transformation is to allow presenters of negotiable drafts and payor banks to better allocate the losses of forgery to the party who is most willing to bear that burden. This ability to allocate losses, in turn, is designed to reduce the costs of forgery and improve the efficiency of the American commercial paper system.

Keywords: Forgery, Negotiable Instrument Law, Signature, Doctrine of Finality

Suggested Citation

Grengs, Christopher and Adams, Edward S., Contracting Around Finality: Transforming Price v. Neal from Dictate to Default (2004). Minnesota Law Review, Vol. 89, pp.163-202, 2004-2005. Available at SSRN: https://ssrn.com/abstract=2624874

Christopher Grengs

Government of the United States of America - Federal Trade Commission ( email )

600 Pennsylvania Ave., NW
Washington, DC 20580
United States

Edward S. Adams (Contact Author)

University of Minnesota - Twin Cities - School of Law ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

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