Code of Alabama

Ala. Code § 7-3-404 (2026)

Impostors; Fictitious Payees.

✓ official Alabama Legislature (ALISON) text, current July 2026

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(a) If an impostor, by use of the mails or otherwise, induces the issuer of an instrument to issue the instrument to the impostor, or to a person acting in concert with the impostor, by impersonating the payee of the instrument or a person authorized to act for the payee, an indorsement of the instrument 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 or for collection.

(b) If (i) a person whose intent determines to whom an instrument is payable (Section 7-3-110(a) or (b)) does not intend the person identified as payee to have any interest in the instrument, or (ii) the person identified as payee of an instrument is a fictitious person, the following rules apply until the instrument is negotiated by special indorsement:

(1) Any person in possession of the instrument is its holder.

(2) An indorsement by any person in the name of the payee stated in the instrument 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 or for collection.

(c) Under subsection (a) or (b), an indorsement is made in the name of a payee if (i) it is made in a name substantially similar to that of the payee or (ii) the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.

(d) With respect to an instrument to which subsection (a) or (b) applies, if a person paying the instrument or taking it for value or for collection fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss resulting from payment of the instrument, the person bearing the loss may recover from the person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.

(e) The adoption of a comparative fault approach in subsection (d) and in Sections 7-3-405 and 7-3-406 is limited to transactions treated under this article and Section 7-4-406 of Article 4 of the Uniform Commercial Code - Bank Deposits and Collections.

(Acts 1995, No. 95-668, p. 1381, §1.)

Notes of Decisions

Cited in 6 cases (2 in the last 5 years), 1987–2025 · leading case: Braden Furniture Co. v. Union State Bank, 109 So. 3d 625 (Ala. 2012).

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Braden Furniture Co. v. Union State Bank, 109 So. 3d 625 (Ala. 2012). · cites it 4× “With regard to [Braden Furniture’s] claims under the Alabama Uniform Commercial Code, [Braden Furniture] amended [its] complaint to make claims pursuant to Alabama Code § 7-3-404, § 7-3-405, § 7-3-406.”

Farmers & Merchants Bank v. Jordan, 532 So. 2d 1252 (Ala. 1988). · cites it 4× “” The Court of Civil Appeals went on to hold that in the instant case the Bank’s oral objection to the trial court’s refusal to charge the jury on the affirmative defense of ratification, which objection was supported by stated grounds based on the pleadings, the evidence, and §…”

FirstBank v. Wells Fargo Bank, N.A. (M.D. Ala. 2025). · cites it 14× “Its arguments can be categorized into three buckets: (1) that all of the Plaintiffs’ common law claims are displaced by Alabama’s UCC; (2) that it is protected under Ala. Code § 7-3-404 because it acted honestly and in good faith; and (3) that the Plaintiffs generally fail to…”

Wells Fargo Bank, N.A. v. Nat'l Bank of Com., 240 So. 3d 541 (Ala. 2017). “"(c) If a drawee asserts a claim for breach of warranty under subsection (a) based on an unauthorized indorsement *546 of the draft or an alteration of the draft, the warrantor may defend by proving that the indorsement is effective under Section 7-3-404 or 7-3-405[, Ala. Code…”

Farmers & Merchants Bank v. Jordan, 532 So. 2d 1249 (Ala. Civ. App. 1987). · cites it 2× “He contends that section 7-3-404, Code 1975 — the grounds given by the Bank to support a ratification defense — does not apply to documents of title and fails to support a ratification defense in this case.”

Mile High, LLC, Pate Holdings, Inc., & Luther S. Pate IV v. Flying M Aviation, Inc. (Appeal from Jefferson Circuit Court: CV-21-903098). (Ala. Civ. App. 2024). · cites it 2× “See Ala. Code 1975, § 7-3-404(d). 12 CL-2023-0260 reasonable care to verify the wiring instructions before executing the wire transfer.”

— Ala. Code § 7-3-404(d) — 2 cases

Braden Furniture Co. v. Union State Bank, 109 So. 3d 625 (Ala. 2012). “With regard to [Braden Furniture’s] claims under the Alabama Uniform Commercial Code, [Braden Furniture] amended [its] complaint to make claims pursuant to Alabama Code § 7-3-404, § 7-3-405, § 7-3-406.”

Mile High, LLC, Pate Holdings, Inc., & Luther S. Pate IV v. Flying M Aviation, Inc. (Appeal from Jefferson Circuit Court: CV-21-903098). (Ala. Civ. App. 2024). “See Ala. Code 1975, § 7-3-404(d). 12 CL-2023-0260 reasonable care to verify the wiring instructions before executing the wire transfer.”

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