Exam 30: Liability of the Parties Under Negotiable Instruments

A holder is a party in possession of an instrument that "runs" to him. An instrument runs to a party if it is:

For a change to constitute an alteration, the person making the change must be a party to the instrument.

Mabel issues a negotiable promissory note to the order of Rachel. Rachel endorses the note to Batton, who takes it as a holder in due course. Batton gives the note to his brother, Albert, as a gift. In this situation:

The Federal Trade Commission expands the rights of a holder in due course in a consumer credit transaction.

Unlike ordinary holders or assignees, holders in due course take free of contract assignment defenses that are good against ordinary holders or assignees.

A holder who is neither a holder in due course nor a holder through a holder in due course is subject to every defense, just as though the instrument were not negotiable.

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.

You are forced to sign a check over to an individual who subsequently transfers the instrument to another. You have only a limited defense regarding payment and therefore would have to pay a holder in due course.

Which of the following is not a universal defense available against all holders?

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

Incapacity cannot be raised as a defense against a holder in due course.

Parties with rights in a negotiable instrument can be assignees or holders.

Which of the following defenses will defeat a holder in due course?