Effect of forgery of Negotiable Instruments

When a signature on a negotiable instrument has forged, it becomes a nullity: the property in the instrument remains vested in the person who is the holder at the time when the forged signature was put on it. 

 

The holder of a forged instrument can neither enforce payment thereon nor give a valid discharge therefore. In the event of the holder being able to obtain payment in spite of forgery, he cannot retain the money. The true owner many sue in tort the person who had received. 

 

This principle is universal in character, by reasons whereof even a holder in due course is not exempt from. It forgery is not capable of being ratified. But what would be the effect of a forged endorsement? The answer to this question is wholly dependent upon whether the instrument had been endorsed in full or in blank. In the former case, the person claiming under the forged endorsement even if he is purchaser for value and in good faith, cannot acquire the rights of a purchaser for value and in good faith cannot acquire the rights of a holder in due course. He acquires no title to the bill or not.