Loss allocation for altered or forged checks is governed by the negotiable instruments and bank deposit articles of the commercial code, refined by agreement and by clearing rules.

Forged drawer signature. The drawee bank generally bears the loss, on the principle that it is best placed to know its customer’s signature, subject to the customer’s own negligence.

Forged endorsement. Loss generally falls back on the depositary bank through transfer and presentment warranties, since it accepted the item from the wrongdoer.

Alterations are allocated by warranty as well, with the drawee able to charge the account only as originally drawn.

Customer duties. An account holder must examine statements with reasonable promptness and notify the bank, or lose the right to assert unauthorized signatures and alterations. A separate rule cuts off claims for repeated wrongdoing by the same person after a stated period regardless of care.

Comparative negligence. Where the customer’s failure to exercise ordinary care substantially contributed to the loss, allocation is shared. Failure to use available fraud-prevention services is increasingly argued here.

Positive pay and payee match services shift the practical risk, and the account agreement’s treatment of a customer’s refusal to enrol matters.

Midnight deadline rules govern return of items and are unforgiving.