Fictitious Payee Rule

That in cases where a person obtains a negotiable instrument (such as a check) made payable to a fictitious person and endorses it with the fictitious person’s signature to effect its payment, the loss falls on the drawer of the instrument and not on the third party that accepts the instrument or the bank that cashes it. Here ‘fictitious’ does not mean ‘imaginary’ but one who has no valid reason to receive the payment (is not a genuine payee). See also imposter rule.

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