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Impostor Rule

Under UNIFORM COMMERCIAL CODE , Article 3, Sect. 404(a), a rule stating that if an impostor endorses a negotiable instrument and receives payment in GOOD FAITH, the drawer of the instrument is responsible for the loss. An example would be if an individual impersonates a person for whom a check has been cut or misrepresents himself as that person's agent. If the impostor receives the check, endorses it, and cashes it at the drawer's bank, the drawer is responsible for the loss, because the bank accepted the endorsement in good faith. The bank may be responsible for a percentage of the loss if it failed to exercise "ordinary care"; for example, if the bank did not check the impostor's identification. The imposter rule is based on the assumption that between the bank and the drawer, the drawer is in a better position to prevent the loss. Also spelled imposter rule.

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