negligence rule
negligence rule. Commercial law. The principle that if a party’s negligence contributes to an unauthorized signing or a material alteration in a negotiable instrument, that party is estopped from raising this issue against later parties who transfer or pay the instrument in good faith. • Examples of negligence include 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, and failing to follow internal procedures designed to prevent forgeries. [Cases: Banks and Banking 148(3); Bills and Notes 279, 365(2). C.J.S. Banks and Banking §§ 434–435; Bills and Notes; Letters of Credit §§ 29–30, 33, 150–151.]
