## Facts

- John Price authorized Benjamin Sutton to draw bills of exchange on him.
- A third party forged Sutton’s signature as drawer on two separate bills that were negotiated to Edward Neal, an indorsee who took for value and in good faith.
- On the first bill, Price did not accept but, when Neal presented it at maturity, Price paid Neal and took up the bill.
- On the second bill, Price wrote an acceptance on the instrument and also directed his bankers to pay it; Neal later received payment from Price’s bankers after the bill was negotiated to him.
- Price later discovered the drawer’s signature on both bills was forged and sued Neal in an action for money had and received to recover the amounts paid.

## Issues

1. Whether a drawee who pays a bill bearing a forged drawer’s signature may recover the payment from an innocent holder who took the bill for value.
2. Whether the result differs when the drawee first accepts the forged bill and the holder is then paid on that acceptance.

## Decision

- The court entered judgment for Neal, denying Price’s recovery.
- Price could not reclaim funds paid on the unaccepted bill from an innocent indorsee for value.
- Price likewise could not reclaim funds paid on the accepted bill, where his acceptance and payment instruction to his bankers induced reliance in the bill’s circulation.

## Legal Principles

- A drawee is expected to know the drawer’s signature and bears the loss if it pays (or accepts and pays) an instrument on a forged drawer signature as against a good-faith holder for value.
- Payment made under a mistake of fact (forgery) is not recoverable from an innocent holder in due course in this negotiable-instruments setting.
- Where two innocent parties are involved, the loss is allocated to the drawee whose payment or acceptance gave the instrument credit and who had the opportunity to examine it before paying.

## Conclusion

Price v. Neal assigns the loss from a forged drawer’s signature to the drawee who pays or accepts and pays, barring restitution against an innocent holder who received payment in good faith and for value.


Price v. Neal, 97 Eng. Rep. 871 (K.B. 1762)