Uniform Commercial Code
Liability of Parties
§ 6A-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), 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.
History of Section.
(P.L. 2000, ch. 238, § 3; P.L. 2000, ch. 421, § 3.)