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 the check's alteration on Kelsey's status as a holder in due course?

Which of the following was the result in Michael J. Kane, Jr. v. Grace Kroll, the case in the text in which the defendant issued a check to the plaintiff to cover the plaintiff's sale of cows to the defendant's son, but later stopped payment on the check because her son said he could not repay her?

A party who receives a negotiable instrument as a(n) ________ or through mistake will be a holder instead of a holder in due course.

A person who engages in fraud may not obtain the rights of an HDC.

Under the Shelter Principle:

A(n) ________ endorsement is the endorser's signature along with a named endorsee.

The ________ is a concept that if an item is transferred from one person to another, the transferee acquires all the rights the transferor had in the item.

An instrument that reads, "Pay to the order of Jones and Green," establishes ________ payees.

Negotiability can be destroyed by a conditional endorsement.

The requirement that a holder in due course must take an instrument for value can be satisfied by receiving an instrument as a gift.