Zachary,who has been authorized to write a check from a company account to pay employees,draws bonus checks from the company account for five imaginary employees; he then endorses the checks in their names and deposits the checks into his own bank account.Which of the following is true regarding whether the company will be required to take the loss on the checks?
A)Under the fictitious payee rule,the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
B)Under the imposter rule,the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
C)Under the transferor rule,the company will be required to take the loss on the checks unless the company can obtain the funds from Zachary.
D)Under the employee-liability rule,the company will be able to recover from any bank that cashed the check in addition to Zachary.
E)Under the Banking Liability Enhancement Act of 2009,the company will be able to recover from any bank that cashed the check in addition to Zachary.

Question

Quizplus · Accepted Answer

The Uniform Commercial Code's "fictitious-payee" rule governs the liability of companies and their endorsed checks.Pursuant to the rule,any check made out to a fictitious payee and endorsed must be honored and is not considered a forgery.

Zachary,who Has Been Authorized to Write a Check from a Company