CO Code § 4-3-402 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 3 - Negotiable Instruments|Part 4 - Liability of Parties|§ 4-3-402. Signature by Representative

  If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the “authorized signature of the represented person” and the represented person is liable on the instrument, whether or not identified in the instrument.    If a representative signs the name of the representative to an instrument and the signature is an authorized signature of the represented person, the following rules apply:   If the form of the signature shows unambiguously that the signature is made on behalf of the represented person who is identified in the instrument, the representative is not liable on the instrument.    Subject to subsection (c) of this section, if (i) the form of the signature does not show unambiguously that the signature is made in a representative capacity or (ii) the represented person is not identified in the instrument, the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument. With respect to any other person, the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.       If a representative signs the name of the representative as drawer of a check without indication of the representative status and the check is payable from an account of the represented person who is identified on the check, the signer is not liable on the check if the signature is an authorized signature of the represented person.     History. Source: L. 94: Entire article R&RE, p. 862, § 1, effective January 1, 1995.    Editor's note:   This section is similar to former § 4-3-103 as it existed prior to 1994.   Cross references:   For unauthorized signatures, see § 4-3-403 .   OFFICIAL COMMENT   1. Subsection (a) states when the represented person is bound on an instrument if the instrument is signed by a representative. If under the law of agency the represented person would be bound by the act of the representative in signing either the name of the represented person or that of the representative, the signature is the authorized signature of the represented person. Former Section 3-401(1) stated that “no person is liable on an instrument unless his signature appears thereon.” This was interpreted as meaning that an undisclosed principal is not liable on an instrument. This interpretation provided an exception to ordinary agency law that binds an undisclosed principal on a simple contract.   It is questionable whether this exception was justified by the language of former Article 3 and there is no apparent policy justification for it. The exception is rejected by subsection (a) which returns to ordinary rules of agency. If P, the principal, authorized A, the agent, to borrow money on P's behalf and A signed A's name to a note without disclosing that the signature was on behalf of P, A is liable on the instrument. But if the person entitled to enforce the note can also prove that P authorized A to sign on P's behalf, why shouldn't P also be liable on the instrument? To recognize the liability of P takes nothing away from the utility of negotiable instruments. Furthermore, imposing liability on P has the merit of making it impossible to have an instrument on which nobody is liable even though it was authorized by P. That result could occur under former Section 3-401(1) if an authorized agent signed “as agent” but the note did not identify the principal. If the dispute was between the agent and the payee of the note, the agent could escape liability on the note by proving that the agent and the payee did not intend that the agent be liable on the note when the note was issued. Former Section 3-403(2)(b). Under the prevailing interpretation of former Section 3-401(1), the principal was not liable on the note under former Section 3-401(1) because the principal's name did not appear on the note. Thus, nobody was liable on the note even though all parties knew that the note was signed by the agent on behalf of the principal. Under Section 3-402(a) the principal would be liable on the note.   2. Subsection (b) concerns the question of when an agent who signs an instrument on behalf of a principal is bound on the instrument. The approach followed by former Section 3-403 was to specify the form of signature that imposed or avoided liability. This approach was unsatisfactory. There are many ways in which there can be ambiguity about a signature. It is better to state a general rule. Subsection (b)(1) states that if the form of the signature unambiguously shows that it is made on behalf of an identified represented person (for example, “P, by A, Treasurer”) the agent is not liable. This is a workable standard for a court to apply. Subsection (b)(2) partly changes former Section 3-403(2). Subsection (b)(2) relates to cases in which the agent signs on behalf of a principal but the form of the signature does not fall within subsection (b)(1). The following cases are illustrative. In each case John Doe is the authorized agent of Richard Roe and John Doe signs a note on behalf of Richard Roe. In each case the intention of the original parties to the instrument is that Roe is to be liable on the instrument but Doe is not to be liable.   Case #1. Doe signs “John Doe” without indicating in the note that Doe is signing as agent. The note does not identify Richard Roe as the represented person.   Case #2. Doe signs “John Doe, Agent” but the note does not identify Richard Roe as the represented person.   Case #3. The name “Richard Roe” is written on the note and immediately below that name Doe signs “John Doe” without indicating that Doe signed as agent.   In each case Doe is liable on the instrument to a holder in due course without notice that Doe was not intended to be liable. In none of the cases does Doe's signature unambiguously show that Doe was signing as agent for an identified principal. A holder in due course should be able to resolve any ambiguity against Doe.   But the situation is different if a holder in due course is not involved. In each case Roe is liable on the note. Subsection (a). If the original parties to the note did not intend that Doe also be liable, imposing liability on Doe is a windfall to the person enforcing the note. Under subsection (b)(2) Doe is prima facie liable because his signature appears on the note and the form of the signature does not unambiguously refute personal liability. But Doe can escape liability by proving that the original parties did not intend that he be liable on the note. This is a change from former Section 3-403(2)(a).   A number of cases under former Article 3 involved situations in which an agent signed the agent's name to a note, without qualification and without naming the person represented, intending to bind the principal but not the agent. The agent attempted to prove that the other party had the same intention. Some of these cases involved mistake, and in some there was evidence that the agent may have been deceived into signing in that manner. In some of the cases the court refused to allow proof of the intention of the parties and imposed liability on the agent based on former Section 3-403(2)(a) even though both parties to the instrument may have intended that the agent not be liable. Subsection (b)(2) changes the result of those cases, and is consistent with Section 3-117 which allows oral or written agreements to modify or nullify apparent obligations on the instrument.   Former Section 3-403 spoke of the represented person being “named” in the instrument. Section 3-402 speaks of the represented person being “identified” in the instrument. This change in terminology is intended to reject decisions under former Section 3-403(2) requiring that the instrument state the legal name of the represented person.   3. Subsection (c) is directed at the check cases. It states that if the check identifies the represented person the agent who signs on the signature line does not have to indicate agency status. Virtually all checks used today are in personalized form which identify the person on whose account the check is drawn. In this case, nobody is deceived into thinking that the person signing the check is meant to be liable. This subsection is meant to overrule cases decided under former Article 3 such as Griffin v. Ellinger, 538 S.W.2d 97 (Texas 1976).   ANNOTATION   Law reviews. For article, “Augmenting the Anomalousness of the Anomalous Indorser”, see 16 Dicta 254.   Annotator's note. The following annotations include cases decided under former provisions similar to this section.   The words “we promise to pay” on a note together with the signature of both a corporation and the corporation president do not impart personal liability to the corporate officer where it is clear that the signatures are intended to bind only the corporation. MacKay v. Lay, 28 Colo. App. 70, 470 P.2d 614 (1970). See New England Elec. Co. v. Shook, 27 Colo. App. 30, 145 P. 1002 (1915).   If an agent exceeds his authority, his principal may complain but a third person may not. MacKay v. Lay, 28 Colo. App. 70, 470 P.2d 614 (1970).   Indorsee may assume action of corporate officer is authorized. An indorsee before maturity and for value of a note subscribed with the name of a corporation by its principal officer who is without notice of any want of authority in such officer may assume that his action is authorized. Gold Glen Mines Tunnel Co. v. Dennis, 21 Colo. App. 284, 121 P. 677 (1912).   If the agency of the party is made to appear, the principal will not be bound beyond the authority given. McClellan v. Morris, 71 Colo. 304 , 206 P. 575 (1922).   Where corporate note is given for noncorporate debt. A promissory note of a corporation given under authority of the directors in acknowledgment of what is not a debt of the corporation and by which some of the directors become creditors of the corporation is invalid as to a payee with knowledge. Gold Glen Mining Co. v. Stimson, 44 Colo. 406 , 98 P. 727 (1908).   Liability of party signing note as individual, without qualifying designation. Where parties sign a note as individuals, without any qualifying designations, they are individually liable as makers, and not as accommodation parties. Rink-A-Dinks v. TNT Motorcycles, Inc., 655 P.2d 431 (Colo. App. 1982).   Parol evidence may be admitted as between the original parties to show that one signed a note in a representative capacity. Bieser v. Irwin, 101 Colo. 210 , 72 P.2d 271 (1937).   An otherwise authorized signature on a negotiable instrument is not converted into an unauthorized forgery when an agent, authorized to sign the principal's name, abuses that authority by negotiating the instrument to a holder in due course for the agent's own personal benefit. Willey v. Mayer, 876 P.2d 1260 (Colo. 1994).   Applied in Abrams v. Colo. Seal and Stripe, Inc., 702 P.2d 765 (Colo. App. 1985); La Junta State Bank v. Travis, 727 P.2d 48 (Colo. 1986); Kunz v. Cycles West, Inc., 969 P.2d 781 (Colo. App. 1998); Genesis Capital Ventures, LLC v. Restore with Apex, Inc., 282 F. Supp. 3d 1225 (D. Colo. 2017 ).