Exam 26: Transferability and Holder in Due Course

Neither an ordinary holder nor an HDC can enforce an instrument that was originally incomplete and later completed in an unauthorized manner.

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is

To make Credit Bank a collecting agent on a check "payable to the order of Duane," Duane should

An insurance agent who receives a check payable to the agent when the item was actually intended as payment to the insurance company is required to make good on the check if it is later dishonored.

The assignee of a negotiable instrument receives only those rights that the assignor had before the assignment.

Farmers Field LLC negotiates a bearer instrument to Grain Co-op by delivery

Machine Shop Inc. issues a payroll check drawn on Nation Bank "payable to the order of O'Dell." O'Dell takes the check to the bank and delivers it to the teller without signing it. This is

Raul wants to transfer a check to Schmidt. The check is defective if it

Rochelle fraudulently induces Sybil to sign a note. Rochelle sells the note to Terry, who does not know of the fraud and takes the note for value and in good faith, and thus becomes an HDC. Terry sells the note to Ulrich, who sells the note back to Rochelle. Does Rochelle acquire Terry's HDC rights in the note?

A check payable to stacked payees is ambiguous and thus payable only jointly-with the indorsements of all of the payees.

Muni Investment Company signs a check payable to Notes & Loans Inc. to buy a promissory note executed by Omni Corporation. This check

The holder of a note who needs the funds owed on it can transfer it for cash to a third party, whom the maker must pay when the note comes due.

On the back of a check payable to Lo, she writes "Pay to Mei, without recourse" and signs it. This

Beth, an accountant for Credits & Debits, acquires a negotiable instrument from Ellen by promising to pay its face value in thirty days. Beth acquires the status of an HDC when she

Generally, an indorser, merely by indorsing, impliedly promises to the pay the holder, or any subsequent endorser the amount of the instrument if the drawer or maker defaults.

Rafe signs a check payable to Shop Mart, which transfers the note by negotiation to Trans-State Bank. With respect to any defenses to payment on the note that Rafe could have raised against Shop Mart, most likely Rafe can

Kris transfers a note, on which Lin is the maker, to Mari, who takes it for value and in good faith. Mari knows that Kris breached the contract underlying the note, giving Lin a defense against payment. With respect to this note, Mari is

Keyes negotiates a bearer instrument to Liu by delivery

An instrument that requires an indorsement for negotiation must contain a handwritten signature.

Usually, an indorsement is unqualified, which means that the indorser is guaranteeing payment on an instrument, in addition to transferring title to it.