The ________ states that a drawer or maker is liable on a forged or unauthorized indorsement if the person signing as or on behalf of a drawer or maker intends the named payee to have no interest in the instrument or when the person identified as the payee is a fabricated person.
A) imposter rule
B) fictitious payee rule
C) fraud in the inception rule
D) fraud in the inducement rule

Question

Quizplus · Accepted Answer

The fictitious payee rule applies in cases where the person identified as the payee is a fabricated person or where the drawer or maker intended the named payee to have no interest in the instrument, making the drawer or maker liable on a forged or unauthorized endorsement. The imposter rule relates to situations where a person poses as the named payee, while the fraud in the inception and fraud in the inducement rules deal with cases where a person is misled into signing a negotiable instrument under false pretenses.

The ________ States That a Drawer or Maker Is Liable