Question

Carl, without Eddie's knowledge, impersonates Eddie and thereby convinces Connie, who has never seen Eddie, to write a check to Eddie. Carl forges Eddie's name on the check and deposits it into his, Carl's, account. Which of the following is true regarding whether Connie will be liable for the amount of the check?
1) Under the forgery rule, Connie will be held liable.
2) Under the transferor rule, Connie will be held liable.
3) Under the payee rule, Connie will be held liable.
4) Under the imposter rule, Connie will be held liable.
5) Under the fictitious payee rule, Connie will not be held liable.

Answer 1

Answer:

4. Under the imposter rule, Connie will be held liable.

Explanation:

AN IMPOSTER RULE is a legal principle affirming that an impostor’s endorsement of a negotiable instrument is not a forgery. Imposter refers to a person who engages in deception under an assumed name or identity. The impostor rule makes an indorsed check effective if the drawer was induced to issue the check by an impersonator of the payee.

The impostor receiving the check may indorse it at the drawer's bank. Hence, the rule makes the drawer of the instrument responsible for the loss because the bank accepted the endorsement in good faith. 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.