U.C.C. § 3-418 (Am. L. Inst. & Unif. L. Comm'n 1990) — Payment or Acceptance by Mistake — Reading Room

U.C.C. § 3-418 — Payment or Acceptance by Mistake

Editorial summary. Section 3-418 governs the drawee's right to recover payment made by mistake — including payment on a forged drawer's signature or an altered instrument, and payment when the drawee has stopped payment. Recovery is barred against a person who took the instrument in good faith and for value or in good-faith reliance on the payment.

Citation: U.C.C. § 3-418 (Am. L. Inst. & Unif. L. Comm'n 1990)Jurisdiction: United StatesEffective: 1990-08-01

Governing Rule

Codified text.

Editorial note. Section 3-418(a) allows the drawee of a draft to recover from the payee or other person receiving payment when the drawee has paid in the mistaken belief that the drawer's signature was authorized or that the instrument had not been altered. Section 3-418(c) preserves the defense of change of position by the recipient.

Relationship to Article 3

Codified text.

Editorial note. Section 3-418 is the modern statement of the rule of Price v. Neal, 3 Burr. 1354 (1762), that a drawee who pays on a forged drawer's signature bears the loss but retains a limited right of recovery in defined circumstances.

Cross References

Codified text.

Editorial note. See U.C.C. §§ 3-407 (alteration); 3-417 (presentment warranties); 4-208 (transfer warranties).

Revision history

1990-08-01 — Promulgated with Revised Article 3.

Canonical source: https://www.law.cornell.edu/ucc/3/3-418