Asked by shuroz marasini on May 07, 2024
Verified
If a person paying an instrument subject to the impostor rule fails to exercise ordinary care, the issuer may recover from the payor to the extent the payor's negligence contributed to the loss.
Ordinary Care
A legal standard requiring individuals to exercise the level of care that a reasonably prudent person would in similar circumstances, aiming to avoid harm to others.
Impostor Rule
A legal principle that protects persons who, in good faith, pay or act upon the instructions of someone falsely purporting to represent another.
- Identify the roles and responsibilities of a holder in due course and the protections afforded to them.
Verified Answer
US
Until SleepMay 08, 2024
Final Answer :
True
Explanation :
Under the impostor rule, if a person (the payor) fails to exercise ordinary care in paying an instrument and that failure substantially contributes to a loss, the issuer can recover from the payor to the extent the payor's negligence contributed to the loss. This principle is designed to allocate the loss between the negligent parties based on their respective contributions to the loss.
Learning Objectives
- Identify the roles and responsibilities of a holder in due course and the protections afforded to them.