Section 23 applies only to forged signatures or responsibility falls on the bank which last

signatures made without authority guaranteed the indorsement and not the drawee
bank.
Forgery – counterfeit making or fraudulent alteration of  Where the payee’s signature is forged, payments
any writing which may consist of made by the drawee bank to collecting bank are
a. Signing of another name with the intent to ineffective. No debtor/creditor relationship is
defraud created. An agency to collect is created between
b. Alteration of an instrument in the name, amount, the person depositing and the collecting bank.
name of payee, etc. with intent to defraud Drawee bank may recover from collecting bank
who may in turn recover from the person
Two cases of forgery in general: depositing.
1. Forgery of promissory notes which may be further
subdivided into: Rules on liabilities of parties on a forged instrument
a. forgery of indorsement in the note  In a PN
b. forgery of the maker’s signature a. a party whose indorsement is forged on a note
2. Forgery of bills of exchange which may be further payable to order and all parties prior to him
classified into: including the maker cannot be held liable by any
a. forgery of an indorsement on the bill holder 
b. forgery of the drawer’s signature, either with b. a party whose indorsement is forged on a note
acceptance by the originally payable to bearer and all parties prior
drawee, or without such acceptance but the bi to him including the maker may be held liable
ll is paid by the drawee by a holder in due course provided that it was
mechanically complete before the forgery
Alterations such as to amounts or like fall under section c. a maker whose signature was forged cannot be
124 held liable by any holder
  In a BOE
Forms of forgery a. the drawer’s account cannot be charged by the
a) Fraud in factum drawee where the drawee paid
b) duress amounting to fraud b. the drawer has no right to recover from the
c) fraudulent impersonation collecting bank
  c. the drawee bank can recover from the collecting
Only the signature forged or made without authority is bank
inoperative, the instrument or other signatures which are d. the payee can recover from the drawer
genuine are affected e. the payee can recover from the recipient of the
  payment, such as the collecting bank
The instrument can be enforced by holders to whose f. the payee cannot collect from the drawee bank
title the forged signature is not necessary g. the collecting bank bears the loss but can
  recover from the person to whom it paid
Persons who are precluded from setting up the forgery h. if payable to bearer, the rules are the same as in
  PN.
a) Those who warrant or admit the genuineness i. if the drawee has accepted the bill, the drawee
of the signature bears the loss and his remedy is to go after the
b) Those who are estopped. forger 
  j. if the drawee has not accepted the bill but has
Persons who are precluded by warranting paid it, the drawee cannot recover from the
a) Indorsers drawer or the recipient of the proceeds, absence
b) persons negotiating by delivery any act of negligence on their part.
c) acceptors
  The collecting bank is liable to the payee and must bear the loss
 drawee bank is conclusively presumed to know because it is its legal duty to ascertain that the payee’s endorsement
the signature of its drawer was genuine before cashing the check. As a general rule, a
 if endorser’s signature is forged, loss will be bank or corporation who has obtained possession of a
borne by the forger and parties subsequent check upon an unauthorized or forged indorsement of the payee’s
thereto signature and who collects the amount of the check from the
 drawee bank is not conclusively presumed to drawee, is liable for the proceeds thereof to the payee or the owner,
know the signature of the indorser. The
now withstanding that the amount has been paid to the person from
whom the check was obtained. It cannot hold the depositor liable.

How would they know that the endorsement was forged? The
verification process becomes feasible if the person whose signature
is being forges, is also a client of the endorser bank, in which case,
the bank may verify the authenticity of the signature against their
file, or do check calls. It is laso important that any of the parties are
neither negligent nor dawdling in exercising their right to action for
them not to be estopped in setting up the defense of forgery.

Every negotiable instrument is deemed prima facie

to have been issued for a valuable consideration. (Sec.
24 NIL)
 
Effects:
a. every person whose signature appears thereon is
a party for value 
b. presumption is disputable
Where value has at any time been given for the instrument, the
holder is deemed a holder for value in respect to
all parties who become such prior to that time. (Sec.
26 NIL)

Consideration – every negotiable instrument is deemed

prima facie to have been issued for a valuable
consideration and every person whose signature appears
thereon to have become a party thereto value

Value – any consideration sufficient to support a simple

contract
Effect of want of consideration:
1. Absence or failure of consideration may be set
up against a holder not a holder in due course
(personal defense)
2. Partial failure of consideration is a defense pro
tanto (Sec 28 NIL)