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Simple English definitions for legal terms
negligence rule
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A quick definition of negligence rule:
The negligence rule is a principle in commercial law that says if someone is careless and their carelessness leads to someone else signing or changing a negotiable instrument without authorization, they cannot later argue against others who transfer or pay the instrument in good faith. Examples of carelessness include leaving blank spaces on the amount line, sending the instrument to the wrong person, or not following procedures to prevent forgeries.
A more thorough explanation:
Definition: The negligence rule is a principle in commercial law that states if a party's carelessness contributes to an unauthorized signing or alteration in a negotiable instrument, that party cannot raise this issue against later parties who transfer or pay the instrument in good faith.
Examples:
- Leaving blanks or spaces on the amount line of the instrument
- Erroneously mailing the instrument to a person with the same name as the payee
- Failing to follow internal procedures designed to prevent forgeries
These examples illustrate how a party's negligence can lead to unauthorized signing or alteration of a negotiable instrument. For instance, leaving blanks or spaces on the amount line of the instrument can allow someone to fill in a larger amount than intended. Similarly, mailing the instrument to the wrong person or failing to follow internal procedures can result in unauthorized signing or alteration.