Negotiable instruments are often subject to fraudulent acts. Generally, the loss for a forged or altered instrument falls on the first party to take the instrument. However, sometimes, an instrument’s drawer or maker is in the best position to prevent such fraudulent acts. In these instances, Article 3 deems it fair to place the risk of loss on the drawer or maker.

I. Imposter Rule

The first situation addressed by Article 3 involves imposters. Imagine a law student wanted to subscribe to...