Exam 17: Holders in Due Course,defenses,and Liabilities

Assume there is a material alteration,but the holder took it in good faith and for value.The holder has a real defense and is not required to pay on the instrument.

Which of these is true regarding "failure of consideration" and "lack of consideration"?

Ted gave Stanley a $300 negotiable note for repairs to his car.Stanley did not do the repairs,but indorsed the note to Nami who did not know of Stanley's lack of work and paid Stanley for its note.Nami gave the note to her daughter,Sopan,for Christmas and Sopan attempted to collect the note.What is Sopan's legal status?

When one of the parties to a contract has failed to do what he or she has previously agreed to do,it is a:

Green Grocer Wholesale,Inc.received an $850.00 check from Bob for a grocery purchase.The check was from Forest Enterprises to Ana and had been indorsed to Bob who,in turn,indorsed the check to Green.The clerk at Green failed to carefully examine the check,not noticing that the number 5 had been changed to an 8.Green Grocer has:

If Spader is considered insane and crazy by his parents and close friends,any checks he writes will be considered void.

Any person who ________ contributes to the ________ of an instrument ________ exercise the defense of ________ against a holder in due course who pays the instrument in good faith.

The holder in due course of a note discharged in bankruptcy can never collect any funds because bankruptcy is a real defense against payment.

LeVoe wrote a check for $1,200 to the order of Henry Smith and delivered it to Smith in payment for a used car that Smith said had a rebuilt engine.Smith indorsed the check and delivered it to Kraus.LeVoe stopped payment on the check when she discovered that the engine had not been rebuilt.Analyze the case.

Mark is mentally incompetent and delights in signing documents.Henry persuades Mark to sign numerous promissory notes which he negotiates.Must Mark pay these notes if they have been held by holders in due course?

Which of the following is true of using the defense of failure of consideration by a maker or drawer of an instrument?

Carl finds a lost dog and returns it to its owner,Betty.Betty gives Carl a check for $50 for his efforts,but later stops payment on the check.Carl cashed the check at Cash-All-Checks,who now seeks to recover from Betty.Will Cash-All-Checks be successful?

Thomas signed a blank promissory note and placed it on his office desk.Kelly,also present there,pilfered the note.The note ended up in the possession of Big Bank.What defense to payment does Thomas have?

Fraud in the inducement is a real defense against holders in due course.

Duress is a personal defense for payment against holders in due course.

The modern concept of 'value' emerged from within the practices of the medieval principles of the Law Merchant.

A person can become a "holder in due course" if she takes an instrument as a gift,and without notice that anything is wrong with the underlying transaction.

Shane carefully wrote a check for $300 and gave it to Ethos Art Gallery for the purchase of a painting.Ethos raised the check to read $800.Shane's bank honored the altered check.Analyze the course of actions Shane could take.

Bob purchases a $1,000 negotiable promissory note from a stranger for $100 that appears to be valid.Will Bob qualify as a holder in due course?

Callaghan bought a bedroom set from a furniture store and signed a consumer credit contract agreeing to pay $150 in 12 monthly installments.The furniture store immediately negotiated the credit contract to a finance company,with which it had an arrangement,and received payment.The furniture turned out to be defective.Discuss if Callaghan can use the defense of defective furniture against the furniture store and the finance company for the money owed.