Exam 27: Negotiation, Holder in Due Course, and Defenses

[Check Issues] Kelsey owns and operates a currency exchange. A regular customer, Rafe, comes in and cashes a $2,000 check issued by ABC Trucking. The day after Kelsey cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the checks she cashed for Rafe had been stolen. At the time she took the check, Kelsey was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Kelsey decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took Rafe's check, she took a check from another customer, Brett. It was later discovered that the check, which was four months old, was the subject of a dispute between Brett and the issuer of the check for whom Brett had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Brett had stopped payment on the checks. Kelsey claimed that as a holder in due course, she was entitled to payment on both checks. -What is the effect of Kelsey receiving notice the day after she cashed the check for Rafe that the check had been stolen?

Which of the following did the court determine on appeal in Wawel Savings Bank v. Jersey Tractor Trailer Training Inc., the case in the text in which a lender who perfected an interest in a debtor's collateral claimed to have priority in bankruptcy over an entity who later entered into an agreement whereby it purchased rights to the debtor's accounts receivables?

Julianne has received a check that she would like to cash, however there is no room for her to endorse the check herself. Julianne can attach a(n) ________ which would allow her to endorse the check.

The Japanese Commercial Code does not recognize ________ but recognizes the legal concept of ________.

List the five conditions under which a holder may take an instrument for value.

The words, "Pay to Allan Smith" followed by the endorser's signature create ________

"Pay to the order of Jones or Green," is an instrument that is payable to ________ payees.

[House Painting] Graciela Reyes signed a check agreeing to pay, "Annie Greene, Marney Harris," $1,000. The payment was for painting her house. A problem with the note was that it spelled Annie's last name, "Greene," whereas Annie spells it simply, "Green." Annie and Marney were having a disagreement regarding how to split up the funds for painting the house. Annie proceeded to sign the check on the back, "Annie Green," and presented it to Hiro Murakami to satisfy a debt that she owed him. Hiro Murakami endorsed the check on the back, "Hiro Murakami, without recourse," and gave it to his nephew, Nate, who took it to the bank for payment. Meanwhile, Graciela has stopped payment on the check because, following a rainstorm, all the paint on the house looked spotted. Marney is unhappy because she did not obtain any of the funds and stated that Annie could not legally endorse the instrument because it misspelled her name and also because she, Marney, did not sign it. -Which of the following is true regarding Nate's rights in relation to the check?

________ is listed as a "real" defense that a holder in due course may be subjected to, even if unaware.

What happens when an instrument lists two payees but is silent as to whether they are joint or alternative?

Which kind of endorsement places a condition on payment?

A holder may still become a holder in due course if he or she is aware of which of the following defects?

The purpose of the Shelter Principle and Holder-in-Due-Course doctrine is:

An endorsement that is the endorser's signature followed by a named endorsee, who then becomes the holder of the instrument, is what type of endorsement?

Which of the following is true regarding how a holder may take an instrument for value, but not become a holder in due course?

A transaction involving a promissory note is an illegal transaction in Russia.

Which of the following does not prevent a holder from being a holder in due course?

There are two kinds of unqualified endorsements: ________ and ________,

Once negotiable, an instrument remains negotiable but a restrictive endorsement can limit what is done.

Shira purchased a refrigerator from ABC Appliance store for $800. She takes the refrigerator home and discovers that it is defective. She calls ABC Appliance store and tells them that she would like to return the refrigerator. ABC Appliance store tells her that they have assigned the promissory note she provided the store in order to purchase the refrigerator to a finance company and that the finance company, as a holder in due course, is not subject to defenses. Which of the following is true regarding the rights of parties?