Defenses Summary of loss allocation when theft has occurred o Forgery of drawers signature loss will fall on drawee

e bank that paid the check bearing the forged signature of its customer o Forged indorsement or alteration loss will fall on the party who took the check directly from the thief Imposters and Fictitious Payees 3-404 o (a) The case in which the drawer writes a check but is induced or duped into handing it over to an imposter, a thief posing as the payee. o (b) Two situations The person whose intent determines to whom an instrument is payable does not intend the person identified as the payee to have an interest in the instrument The person identified as the payee of an instrument is a fictitious person Someone who does not exist except in the mind of the thief Fraudulent Indorsement by a responsible employee 3-405 o Defines when an employee can be said to have responsibility with respect to a particular instrument (b) If an employer entrusts an employee with responsibility with regard to a particular check, and that employee fraudulently indorses the check The loss because of the thieving employee will be shifted to the employer o (a)(2) Fraudulent Indorsement comes in two ways The faithless employee indorses the name of the employer on checks that have been issued to the employer and on which the employer is the named payee When the employer has issued a check intended for another payee and the responsible employee forges the indorsement of the named payee Examples (1) 3-404(a) Imposter defense o Thief impersonates the payee An indorsement by any person in the name of the payee is effective as the indorsement of the payee in favor of a person who, in good faith, pays the instrument or takes it for value of collection Bank can argue that the drawers signature on the check was valid The person who was duped into personally handing over the check to a thief will have to bear the loss stemming from the theft o 3-404(d) Comparative negligence Allows the person who bears the loss to recover if the bank failed to exercise ordinary care