Exam 29: Liability of the Parties Under Negotiable Instruments

Jones issued a check to Smith in return for Smith's promise to do work. Smith never did the promised work, but offered to buy goods from Gomez by endorsing the check to Gomez. Gomez had had no prior dealings with Jones or Smith, but accepted the check in payment. Gomez:

The primary party on a certificate of deposit is the drawer.

If a person signs a negotiable instrument because he is fraudulently deceived regarding its nature or essential terms gives the holder a universal defense..

A taker of a negotiable instrument may be denied the status and protection of a holder in due course if:

Economic duress, in the form of a reluctance to enter into a financially demanding instrument, is a universal defense.

Isidro issued a negotiable promissory note to his attorney in return for the attorney's promise to perform legal services. The attorney never rendered the legal services but quickly negotiated the note to Anna, a holder in due course. Anna and Mark were involved in business negotiations and Anna offered to purchase a car from Mark. She offered as part payment for the car the note issued by Isidro. By coincidence, Mark knew both Isidro and the attorney and the facts concerning the note and the unperformed legal services. Despite this, Mark accepted a negotiation of the note from Anna. Isidro refused to pay the note and Mark eventually sued Isidro to collect. What is the probable outcome?

A person who acquires an instrument with knowledge that there is a defense a party may have cannot be an HDC.

The primary party on a draft is the drawee, assuming that the drawee has accepted the draft.

When the primary party refuses to pay an instrument according to its terms, said party is required to give:

A holder in due course must meet all of the following conditions except:

The law gives certain holders of a negotiable instrument a preferred standing by protecting them from all defenses when they sue to collect payment.

A holder through a holder in due course is subject to only certain, limited defenses.

Which of the following will not be considered value in connection with determining holder in due course status?

Universal defenses work against all of the following except:

Generally, defenses that could be raised in a breach of contact claim cannot be raised against a holder in due course.

Bad faith may exist because a transferee takes an instrument under suspicious circumstances.

Under the __________doctrine, the holder has taken so many instruments from its transferor or is so closely connected with the transferor that any knowledge the transferor has is deemed transferred to the holder, preventing holder in due course status.

A person cannot become a holder through a holder in due course unless that person satisfies the requirements for holder in due course status.

The FTC rule concerning holders in due course is confined to consumer credit transactions.

A holder having the rights of a holder in due course is subject to the defense of fraud in the inducement.