Exam 17: Holders in Due Course Defenses and Liabilities

____________ meansa demand made by a holder to pay or accept an instrument.

Which of these is true regarding "failure of consideration" and "lack of consideration"?

When Tina was fifteen years of age, she gave Sam a negotiable note payable five years later. Sam negotiated it to Neighborhood Bank, who became a holder in due course. Tina may assert her age as a defense against Neighborhood Bank to disaffirm the payment.

LeVoe wrote a check for $1,200 to the order of Henry Smith and delivered it to Smith in payment for a used car that Smith said had a rebuilt engine. Smith indorsed the check and delivered it to Kraus. LeVoe stopped payment on the check when she discovered that the engine had not been rebuilt. Analyze the case.

The holder in due course of a note discharged in bankruptcy has no hope of collecting any funds.

If the taker is negligent in not discovering that something was wrong with the instrument, it establishes lack of good faith.

If Spader is found insane by a court, any checks he writes after this will be considered void.

When one of the parties to a contract has failed to do what he or she has previously agreed to do, it is a:

No one who has a real defense is required to pay an instrument.

Mark is mentally incompetent and delights in signing documents. Henry persuades Mark to sign numerous promissory notes which he negotiates. Must Mark pay these notes if they have been held by holders in due course?

Fraud in the inducement is a personal defense.

Indorsers are obligated to make the payment only when the:

Green Grocer Wholesale, Inc. received an $850.00 check from Bob for a grocery purchase. The check was from Forest Enterprises to Ana and had been indorsed to Bob who, in turn, indorsed the check to Green. The clerk at Green failed to carefully examine the check, not noticing that the number 5 had been changed to an 8. Green Grocer has:

Big Bank is unable to provide notice of dishonor for three days because a fiber optic cable was accidentally cut by a construction worker. Will Big Bank be liable for its failure to act in a timely manner?

On May 15, 2015, Jason indorsed a check dated January 15, 2015, and payable by him to ALS Check Cashing Service. ALS:

Duress can be used as a defense for payment against holders in due course.

In exchange for some illegal drugs, Popka wrote a $500 check to White. Immediately thereafter, Popka stopped payment on the check. Can White recover the $500 from Popka in court? Explain.

Callaghan bought a bedroom set from a furniture store and signed a consumer credit contract agreeing to pay $150 in 12 monthly installments. The furniture store immediately negotiated the credit contract to a finance company, with which it had an arrangement, and received payment. The furniture turned out to be defective. Discuss if Callaghan can use the defense of defective furniture against the furniture store and the finance company for the money owed.

Tom gave celebrity Lynnetta Landau a blank sheet of paper and asked her to sign her autograph on it. Then, without Lynetta's knowledge, Tom wrote a promissory note made payable to him for $3,000 above her signature. This kind of fraud is known as fraud:

Tammy purchases a promissory note that has numbers scratched out and rewritten. What legal problem will Tammy encounter in claiming to be a holder in due course of the note?