When is an individual (including businesses) liable for a representative signing a negotiable instrument?

If a representative (an agent) signs a commercial instrument on behalf of a the represented person or business (the principal), the principal is bound and made liable by the representative signing either the principals name or the agents name. The representative is not liable on the instrument if:

• the form of the signature shows unambiguously that the signature is made on behalf of the represented person, and
• the instrument identifies the represented person.

This standard goes beyond the contract law standards for agent authority and principal liability.

Note: Special rules apply for promoters of business entities that do not yet exist.