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The Vermont Statutes Online



Title

09A

:
Uniform Commercial Code






Chapter

003

:
Commercial Paper











 

§

3-404. Impostors; fictitious payees

(a) If an

impostor, by use of the mails or otherwise, induces the issuer of an instrument

to issue the instrument to the impostor, or to a person acting in concert with

the impostor, by impersonating the payee of the instrument or a person

authorized to act for the payee, an indorsement of the instrument by any person

in the name of the payee is effective as the indorsement of the payee in favor

of a person who, in good faith, pays the instrument or takes it for value or

for collection.

(b) If (i) a

person whose intent determines to whom an instrument is payable (§ 3-110(a) or

(b)) does not intend the person identified as payee to have any interest in the

instrument, or (ii) the person identified as payee of an instrument is a

fictitious person, the following rules apply until the instrument is negotiated

by special indorsement:

(1) Any person

in possession of the instrument is its holder.

(2) An

indorsement by any person in the name of the payee stated in the instrument is

effective as the indorsement of the payee in favor of a person who, in good

faith, pays the instrument or takes it for value or for collection.

(c) Under

subsection (a) or (b) of this section, an indorsement is made in the name of a

payee if (i) it is made in a name substantially similar to that of the payee or

(ii) the instrument, whether or not indorsed, is deposited in a depositary bank

to an account in a name substantially similar to that of the payee.

(d) With respect

to an instrument to which subsection (a) or (b) of this section applies, if a

person paying the instrument or taking it for value or for collection fails to

exercise ordinary care in paying or taking the instrument and that failure

substantially contributes to loss resulting from payment of the instrument, the

person bearing the loss may recover from the person failing to exercise

ordinary care to the extent the failure to exercise ordinary care contributed

to the loss. (Added 1993, No. 158 (Adj. Sess.), § 12, eff. Jan. 1, 1995.)