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The Vermont Statutes Online



Title

09A

:
Uniform Commercial Code






Chapter

003

:
Commercial Paper











 

§

3-405. Employer's responsibility for fraudulent indorsement by employee

(a) In this

section:

(1)

"Employee" includes an independent contractor and employee of an

independent contractor retained by the employer.

(2)

"Fraudulent indorsement" means (i) in the case of an instrument

payable to the employer, a forged indorsement purporting to be that of the

employer, or (ii) in the case of an instrument with respect to which the

employer is the issuer, a forged indorsement purporting to be that of the person

identified as payee.

(3)

"Responsibility" with respect to instruments means authority (i) to

sign or indorse instruments on behalf of the employer, (ii) to process

instruments received by the employer for bookkeeping purposes, for deposit to

an account, or for other disposition, (iii) to prepare or process instruments

for issue in the name of the employer, (iv) to supply information determining

the names or addresses of payees of instruments to be issued in the name of the

employer, (v) to control the disposition of instruments to be issued in the

name of the employer, or (vi) to act otherwise with respect to instruments in a

responsible capacity. "Responsibility" does not include authority

that merely allows an employee to have access to instruments or blank or

incomplete instrument forms that are being stored or transported or are part of

incoming or outgoing mail, or similar access.

(b) For the

purpose of determining the rights and liabilities of a person who, in good

faith, pays an instrument or takes it for value or for collection, if an

employer entrusted an employee with responsibility with respect to the

instrument and the employee or a person acting in concert with the employee

makes a fraudulent indorsement of the instrument, the indorsement is effective

as the indorsement of the person to whom the instrument is payable if it is

made in the name of that person. If the 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 the fraud, 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.

(c) Under subsection

(b) of this section, an indorsement is made in the name of the person to whom

an instrument is payable if (i) it is made in a name substantially similar to

the name of that person or (ii) the instrument, whether or not indorsed, is

deposited in a depositary bank to an account in a name substantially similar to

the name of that person. (Added 1993, No. 158 (Adj. Sess.), § 12, eff. Jan. 1,

1995.)