When an indorsement on an instrument has been forged or is unauthorized,the loss falls on the party who first takes the forged instrument after the forgery.Which of the following is an exception to this rule?
A) the FTC HDC rule
B) the exclusionary rule
C) the imposter rule
D) the good faith rule

Question

Quizplus · Accepted Answer

The imposter rule is an exception to the general rule that the loss falls on the party who first takes the forged instrument after the forgery. Under the imposter rule, if a person is induced by fraud or misrepresentation to issue a negotiable instrument to an imposter, title does not pass to the imposter, and the person who issued the instrument is not liable on it. Instead, the loss falls on the person who took the instrument from the imposter.

When an Indorsement on an Instrument Has Been Forged or Is